ACCA SP Strategic Business Reporting (SBR)

Question 1

Under IFRS 15 Revenue from Contracts with Customers, at which point should revenue be recognised for a contract that includes a significant financing component?

Accepted Answer

When the performance obligation is satisfied, with the transaction price adjusted for the time value of money

Answer

When cash is received from the customer

Answer

At the contract inception date

Answer

When the invoice is issued to the customer

Question 2

Company A acquires 80% of Company B for £12 million. The fair value of B's identifiable net assets is £10 million. The non-controlling interest is measured at fair value of £2.8 million. What is the goodwill arising on acquisition under IFRS 3?

Accepted Answer

£4.8 million

Answer

£2 million

Answer

£2.8 million

Answer

£4 million

Question 3

Under IAS 36 Impairment of Assets, which of the following is the correct definition of 'value in use'?

Accepted Answer

The present value of estimated future cash flows expected to arise from the continuing use of the asset and its ultimate disposal

Answer

The price that would be received to sell the asset in an orderly transaction between market participants

Answer

The cost of replacing the asset with a similar asset of equivalent productive capacity

Answer

The net realisable value of the asset less costs to sell

Question 4

A company has a defined benefit pension plan. Under IAS 19 Employee Benefits, which of the following components is recognised in other comprehensive income (OCI) and NOT recycled to profit or loss?

Accepted Answer

Remeasurements of the net defined benefit liability

Answer

Current service cost

Answer

Net interest on the net defined benefit liability

Answer

Past service cost

Question 5

Under IFRS 16 Leases, a lessee enters a 5-year lease for office space with annual payments of £100,000 paid in arrears. The lessee's incremental borrowing rate is 6%. Which entry is recorded at lease commencement?

Accepted Answer

Debit right-of-use asset £421,236, Credit lease liability £421,236

Answer

Debit operating expense £100,000, Credit cash £100,000

Answer

Debit right-of-use asset £500,000, Credit lease liability £500,000

Answer

Debit prepayment £100,000, Credit cash £100,000

Question 6

A parent company sells goods to its subsidiary at a profit. At the year-end, 40% of these goods remain in the subsidiary's inventory. In the consolidated financial statements, how should this unrealised profit be treated?

Accepted Answer

Eliminate 100% of the unrealised profit on the unsold inventory by reducing group inventory and group retained earnings

Answer

No adjustment is needed as the transaction is at arm's length

Answer

Eliminate only the parent's share of the unrealised profit based on its ownership percentage

Answer

Eliminate 40% of total intercompany sales revenue