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Free ACCA Strategic Business Reporting Practice Questions & Answers
400 exam-style Strategic Business Reporting questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 211
Shares issued as consideration in a business combination are measured at:
Select an option first.
Correct answer: B — FV at the acquisition date
Explanation: B is correct: shares issued are consideration at their FV on the acquisition date. A is wrong — par is arbitrary nominal. C is wrong — measuring at net assets eliminates goodwill by definition. D is wrong — nominal + premium is legal share capital, not necessarily FV.
Question 212
IFRS 10 requires structured entities to be consolidated when:
Select an option first.
Correct answer: B — Parent meets the three-element control test — even without majority voting rights
Explanation: B is correct: IFRS 10 uses a control-based approach regardless of legal form — voting rights may be irrelevant for structured entities; power can be obtained through other rights. A is wrong — jurisdiction is irrelevant. C is wrong — no revenue threshold. D is wrong — financing alone creates variable return exposure but not necessarily control.
Question 213
Under IAS 21, presentation currency differs from functional currency — the translation method uses:
Select an option first.
Correct answer: B — Closing rate for balance sheet; average/transaction rate for P&L; differences in equity
Explanation: B is correct: the IAS 21 translation method: assets/liabilities at closing rate; income/expenses at transaction or average rates; resulting differences are the FCTR in equity. A is wrong — historical rates are only for equity items. C is wrong — average rate is only for P&L. D is wrong — forward rates apply in hedge accounting.
Question 214
A subsidiary acquired on 1 October (December year end). Its results in the consolidated income statement cover:
Select an option first.
Correct answer: B — Three months — from acquisition date to 31 December
Explanation: B is correct: IFRS 10 requires post-acquisition results only — from the date control is obtained (1 October) to year end (31 December) = 3 months. A is wrong — pre-acquisition results are excluded. C is wrong — six months is arbitrary. D is wrong — the subsidiary's own year is irrelevant.
Question 215
Full goodwill vs partial goodwill method differences include:
Select an option first.
Correct answer: B — Full goodwill gives higher goodwill, higher NCI equity, and different impairment allocation between parent and NCI
Explanation: B is correct: full goodwill = higher goodwill (includes NCI's share) + higher NCI equity. Impairment under full goodwill affects both parent and NCI; partial goodwill impairment affects only parent's goodwill. A is wrong — goodwill differs. C is wrong — revenues are unaffected. D is wrong — parent retained earnings not directly affected.
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Question 216
Cash paid to acquire a subsidiary in the consolidated cash flow statement is:
Select an option first.
Correct answer: B — An investing cash outflow, net of cash acquired in the subsidiary
Explanation: B is correct: IAS 7 requires acquisition of subsidiaries as an investing cash outflow, net of cash and cash equivalents acquired. A is wrong — acquisition is a capital decision. C is wrong — financing relates to capital structure. D is wrong — the flow must appear in the statement.
Question 217
Under IAS 27, a parent's investment in a subsidiary in separate financial statements is measured at:
Select an option first.
Correct answer: B — Cost, or at FV per IFRS 9, or using the equity method — as an accounting policy choice
Explanation: B is correct: IAS 27 allows cost, IFRS 9 FV, or equity method in separate financial statements. A is wrong — consolidated net assets apply to consolidated accounts. C is wrong — consolidated carrying amount includes consolidation adjustments. D is wrong — FV/OCI is one option under IFRS 9.
Question 218
Under IFRS 11, determining whether an arrangement is a JO or JV requires assessment of:
Select an option first.
Correct answer: B — Legal form + terms of contractual arrangement + other facts and circumstances
Explanation: B is correct: IFRS 11 requires a structured assessment: legal form, contractual terms (rights to assets/obligations for liabilities), and other facts (e.g. whether the arrangement primarily provides output to parties). A is wrong — voting alone is insufficient. C is wrong — number of parties is irrelevant. D is wrong — profitability is irrelevant.
Question 219
An investor owns 35% of an associate. The associate recognises OCI revaluation surplus of $100,000. The investor recognises:
Select an option first.
Correct answer: B — $35,000 in OCI and in the investment carrying amount
Explanation: B is correct: equity method captures both P&L and OCI of the associate. The investor's 35% share of OCI = $35,000 goes to the investor's OCI, increasing the investment carrying amount. A is wrong — OCI items are not in P&L. C is wrong — equity method captures OCI. D is wrong — OCI is recognised as it arises.
Question 220
Deferred tax arises on IFRS 3 fair value adjustments because:
Select an option first.
Correct answer: B — Fair value adjustments change carrying amounts in consolidated accounts but not the tax base — creating new temporary differences
Explanation: B is correct: FV uplifts in consolidated accounts create CA > tax base temporary differences — hence DTLs. A is wrong — acquiree may not have had these. C is wrong — probability assessment still applies to DTAs. D is wrong — tax is not immediately payable on FV adjustments.
Question 221
Under IFRS 10, power over an investee exists when the investor has the current ability to direct 'relevant activities'. Relevant activities are:
Select an option first.
Correct answer: B — Activities that significantly affect the investee's returns
Explanation: B is correct: relevant activities under IFRS 10 are those that significantly affect the investee's returns. The investor with power can direct these activities currently — not just historically or hypothetically. A is wrong — not all activities are relevant. C is wrong — operational activities may also be relevant. D is wrong — voting is a means of directing, not the definition of relevant activities.
Question 222
When an entity retains a non-controlling interest after losing control of a subsidiary:
Select an option first.
Correct answer: B — The retained interest is remeasured to FV at the date of loss of control and accounted for under IFRS 9, IAS 28 or IFRS 11 going forward
Explanation: B is correct: on loss of control, the retained interest is remeasured to FV, which becomes the new cost basis. It is then accounted for as a financial asset (IFRS 9), associate (IAS 28) or joint venture (IFRS 11), depending on the level of remaining influence. A is wrong — the old carrying amount is not used. C is wrong — writing off ignores FV. D is wrong — if control is lost, consolidation ceases.
Question 223
Under IAS 21, a highly inflationary economy subsidiary's financial statements must be:
Select an option first.
Correct answer: B — First restated under IAS 29 (Financial Reporting in Hyperinflationary Economies) and then translated at the closing rate
Explanation: B is correct: when a subsidiary operates in a hyperinflationary economy, its financial statements are first restated to current purchasing power under IAS 29 before translation. The closing rate is then applied. A is wrong — translation without IAS 29 restatement gives misleading results. C is wrong — historical rates cannot be used. D is wrong — exclusion is not permitted.
Question 224
An entity has a 25% interest in a joint arrangement. Legal form is a separate vehicle (LLC). Contractual terms require parties to share liabilities pro rata and have rights to all output. Under IFRS 11, this is classified as:
Select an option first.
Correct answer: B — A joint operation — recognise direct share of assets, liabilities, revenue and expenses
Explanation: B is correct: the facts override the legal form — the contractual terms give parties direct rights to assets and obligations for liabilities (all output consumed by parties, not the vehicle), pointing to a joint operation. A is wrong — legal form as separate vehicle indicates JV but is overridden by contractual terms. C is wrong — there is no control. D is wrong — 25% is not the sole determinant.
Question 225
Under IFRS 3, the recognition of deferred tax on a business combination affects goodwill because:
Select an option first.
Correct answer: B — DTL recognised reduces the fair value of identifiable net assets — increasing goodwill for the deferred tax amount
Explanation: B is correct: when DTL is recognised on FV adjustments (fair value increases create taxable temporary differences), this reduces the net identifiable assets — increasing goodwill. Goodwill = consideration − (FV net assets which are now reduced by the DTL). A is wrong — DTL reduces, not increases, net assets. C is wrong — DTL is included. D is wrong — goodwill is increased.
Question 226
An entity loses control of a subsidiary but retains 40% (becoming an associate). The FCTR attributable to the disposed subsidiary is:
Select an option first.
Correct answer: B — Reclassified to P&L in full as part of the disposal gain/loss
Explanation: B is correct: on loss of control, the full cumulative FCTR attributable to the disposed subsidiary (not just the 60% sold) is reclassified to P&L. The retained 40% begins its new FCTR accumulation going forward. A is wrong — permanent retention is not permitted. C is wrong — only full recycling applies on loss of control. D is wrong — it goes through P&L.
Question 227
Under IFRS 10, if an investor holds 45% of voting rights but multiple other investors each hold less than 5% and historically have not organised to vote collectively, the investor most likely has:
Select an option first.
Correct answer: B — De facto control — and should consolidate under IFRS 10
Explanation: B is correct: IFRS 10 considers de facto control — if the remaining 55% is widely dispersed and historically passive, the 45% holder may have practical power to direct relevant activities unilaterally. A is wrong — significant influence is for associates; de facto control triggers consolidation. C is wrong — no contractual arrangement for joint control. D is wrong — the dispersed holding is key.
Question 228
In a group consolidation, the pre-acquisition retained earnings of the subsidiary are:
Select an option first.
Correct answer: B — Eliminated against the cost of investment in calculating goodwill — they are not included in consolidated retained earnings
Explanation: B is correct: pre-acquisition reserves of the subsidiary are part of the identifiable net assets at acquisition — they are used in the goodwill calculation and are not included in consolidated retained earnings (which only includes post-acquisition earnings). A is wrong — pre-acquisition reserves belong to the goodwill calculation. C is wrong — they are not transferred to NCI separately. D is wrong — they are not presented separately.
Question 229
Under IFRS 3, the fair value of identifiable intangible assets (e.g. customer relationships, technology) recognised on acquisition are subsequently:
Select an option first.
Correct answer: B — Amortised over their useful lives (or tested for impairment annually if indefinite life) in the consolidated statements
Explanation: B is correct: identifiable intangibles recognised at acquisition are subsequently amortised over their finite useful lives (or tested annually if indefinite life) in the consolidated financial statements — generating amortisation charges that affect consolidated profit. A is wrong — immediate write-off would misrepresent the economic benefit. C is wrong — amortised cost or amortisation, not rolling FV. D is wrong — they remain separate from goodwill.
Question 230
A group has upstream and downstream intragroup sales. For downstream sales (parent sells to subsidiary):
Select an option first.
Correct answer: B — The full unrealised profit is eliminated but since the profit arose in the parent, NCI does not bear any of the elimination
Explanation: B is correct: for downstream sales (parent to subsidiary), the unrealised profit arose in the parent's books. On elimination, only the parent's equity/retained earnings are reduced — NCI is not affected since the profit was the parent's. A misleads — NCI is specifically not affected. C is wrong — 50% is not the rule. D is wrong — 100% elimination applies.
Question 231
When translating a foreign associate under the equity method, the investor's share of the associate's post-acquisition reserves includes:
Select an option first.
Correct answer: B — Share of P&L (at average rate) and share of OCI items (translated appropriately) — with the investor's share of the associate's FCTR also included in the investor's FCTR
Explanation: B is correct: the investor includes its share of the associate's P&L and OCI. If the associate has a FCTR, the investor's share flows into the investor's own FCTR. This ensures the equity method investment reflects all components of the associate's comprehensive income. A is wrong — OCI items including FCTR are also included. C is wrong — dividends reduce the carrying amount. D is wrong — closing rate applies to the carrying amount but the movements are tracked as above.
Question 232
Under IFRS 10, the consolidation exemption for a parent entity applies when:
Select an option first.
Correct answer: B — The parent is itself a subsidiary and its ultimate parent (or intermediate parent) prepares consolidated financial statements under IFRS that are publicly available, and the minority shareholders do not object
Explanation: B is correct: IFRS 10 allows an intermediate parent to claim an exemption from consolidation if: it is wholly or partially owned and its owners do not object, its ultimate parent prepares IFRS-compliant consolidated accounts that are publicly available, and it has no debt/equity traded on a public market. A is wrong — number of subsidiaries is irrelevant. C is wrong — different country is not the criterion. D is wrong — unlisted status does not automatically grant exemption.
Question 233
When assessing de facto control under IFRS 10, key factors include:
Select an option first.
Correct answer: B — The relative size of the investor's holding compared to other shareholders, voting patterns at shareholder meetings, and whether the investor has practical ability to direct relevant activities without needing support from others
Explanation: B is correct: de facto control analysis under IFRS 10 considers: absolute size of holding, dispersion of other shareholders (whether others are sufficiently dispersed to make it practically impossible to organise opposition), voting patterns, and the investor's practical ability to direct relevant activities. A is wrong — there is no specific 40% threshold. C is wrong — board representation is one factor but not determinative. D is wrong — public statements create no IFRS 10 test.
Question 234
Under IAS 28, an investor with significant influence should account for its share of an associate's contingent liabilities:
Select an option first.
Correct answer: B — By disclosing its proportionate share of associate contingent liabilities as part of the equity method disclosures
Explanation: B is correct: IAS 28 requires the investor to disclose its proportionate share of the associate's contingent liabilities (and capital commitments). They are not recognised as provisions in the investor's financial statements but are disclosed. A is wrong — full provision is not required. C is wrong — contingent liabilities must be disclosed. D is wrong — associates are not consolidated.
Question 235
Under IFRS 3, the recognition of 'contingent assets' of the acquiree is:
Select an option first.
Correct answer: B — Prohibited — contingent assets cannot be separately recognised in a business combination
Explanation: B is correct: IFRS 3 does not allow separate recognition of contingent assets (possible assets whose existence is confirmed by future events outside the entity's control). Any expected inflows from contingent assets are captured in the goodwill/consideration calculation. A is wrong — no contingent asset recognition, even if probable. C is wrong — probability is not the threshold. D is wrong — acquiree disclosure is irrelevant.
Question 236
Under IFRS 10, when preparing consolidated financial statements, the reporting dates of the parent and subsidiary must be:
Select an option first.
Correct answer: B — The same OR the subsidiary prepares additional statements at the parent's reporting date; if different by up to 3 months, adjustments for significant transactions are made
Explanation: B is correct: IFRS 10 requires the same reporting date. If different dates are used (maximum 3 months difference allowed), adjustments must be made for significant transactions between the subsidiary's reporting date and the parent's consolidation date. A is wrong — up to 3 months difference is permitted. C is wrong — the limit is 3 months, not 12. D is wrong — listing status does not determine the rule.
Question 237
Under IAS 21, when a subsidiary in a foreign country has a functional currency different from both its local country currency and the parent's functional currency:
Select an option first.
Correct answer: B — The subsidiary's own functional currency is used for recording transactions and preparing its financial statements, which are then translated into the group's presentation currency
Explanation: B is correct: functional currency is determined by the primary economic environment in which the subsidiary operates — not by local law or parent preference. The subsidiary prepares statements in its functional currency, then IAS 21 translation is applied to present in the group's presentation currency. A is wrong — the local currency may not be the functional currency. C is wrong — the parent's currency is not automatically adopted. D is wrong — averaging currencies is not an accounting concept.
Question 238
Under IFRS 3, if the consideration transferred is less than the fair value of identifiable net assets acquired (bargain purchase), the entity must:
Select an option first.
Correct answer: B — Reassess whether all assets and liabilities have been correctly identified and measured, then recognise any remaining gain immediately in profit or loss
Explanation: B is correct: before recognising a bargain purchase gain, IFRS 3 requires reassessment of measurements to ensure nothing has been missed. If a gain still remains after reassessment, it is recognised immediately in P&L. A is wrong — deferred income is not used. C is wrong — reducing assets to match consideration violates the fair value requirement. D is wrong — negative goodwill is not carried forward under IFRS.
Question 239
When a subsidiary has minority shareholders and the parent acquires the subsidiary's shares from those minority shareholders, increasing its holding from 70% to 90%, the journal entry in the consolidated accounts is:
Select an option first.
Correct answer: B — Dr NCI (reducing NCI balance) and the residual Dr/Cr goes to equity (parent's equity)
Explanation: B is correct: IFRS 10 equity transaction treatment. NCI carrying amount is reduced by the proportion acquired; the difference between consideration paid and change in NCI goes to a separate equity component (e.g. 'transactions with NCI'). No goodwill adjustment, no P&L. A is wrong — goodwill is not remeasured. C is wrong — no P&L. D is wrong — consolidation is affected; the NCI decreases.
Question 240
Under IFRS 11, a joint operator recognises:
Select an option first.
Correct answer: B — Its own assets, its own liabilities (including share of joint liabilities), its own revenues (including share of joint revenues), and its own expenses (including share of joint expenses)
Explanation: B is correct: IFRS 11 requires joint operators to recognise their own direct share of assets (not an investment), liabilities, revenues and expenses from the joint operation — similar to how they would account for these items if held directly. A is wrong — it is not an investment; direct recognition applies. C is wrong — only the proportionate share. D is wrong — fair value is not used.
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