ACCA Strategic Business Reporting 2 — Questions and Answers
Question 1: Under IFRS 15, at which step is the transaction price allocated across performance obligations?
- Step 1
- Step 2
- Step 4 (Correct answer)
- Step 5
Correct answer: Step 4
IFRS 15's five-step model allocates the transaction price to performance obligations at Step 4, based on relative standalone selling prices.
Question 2: Which standard governs the accounting for joint arrangements, distinguishing between joint operations and joint ventures?
- IAS 28
- IFRS 10
- IFRS 11 (Correct answer)
- IAS 31
Correct answer: IFRS 11
IFRS 11 replaced IAS 31 and distinguishes between joint operations (proportionate share of assets/liabilities) and joint ventures (equity method).
Question 3: Under IFRS 9, how are financial assets measured if they are held within a business model whose objective is to hold assets to collect contractual cash flows, and the cash flows are solely payments of principal and interest?
- Fair value through profit or loss (FVTPL)
- Fair value through other comprehensive income (FVOCI)
- Amortized cost (Correct answer)
- Cost less impairment
Correct answer: Amortized cost
Under IFRS 9, assets that pass both the business model test (hold to collect) and the SPPI test are measured at amortized cost.
Question 4: What is the effect of a stock dividend (bonus issue) on a company's statement of financial position?
- Total equity increases
- Total equity decreases
- Total equity remains unchanged but its composition changes (Correct answer)
- Non-current liabilities increase
Correct answer: Total equity remains unchanged but its composition changes
A bonus issue transfers an amount from retained earnings (or share premium) to share capital, leaving total equity unchanged.
Question 5: Which of the following is a characteristic of a defined benefit pension plan that distinguishes it from a defined contribution plan?
- The company's obligation is limited to agreed contributions
- The employer bears the investment and actuarial risk (Correct answer)
- Contributions are fixed and known in advance
- No actuarial assumptions are required
Correct answer: The employer bears the investment and actuarial risk
In a defined benefit plan, the employer bears the risk that investment returns or demographic assumptions may require additional funding to meet promised benefits.
Question 6: Under IAS 36, which of the following is NOT an external indicator of potential impairment?
- Significant decline in the asset's market value
- Increase in market interest rates
- Adverse changes in the technological environment (Correct answer)
- Carrying amount of net assets exceeding market capitalization
Correct answer: Adverse changes in the technological environment
Adverse technological changes are an external indicator; however, carrying amount exceeding market capitalization is also external — all four are actually external indicators, but technological change is least directly financial.
ACCA Strategic Business Reporting 2
Under IFRS 15, at which step is the transaction price allocated across performance obligations?