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FR A The conceptual and regulatory framework

Written by Fahad Mirza (ACCA)

7 ACCA Financial Reporting questions with answers and explanations.

Printable worksheet with answer key

All questions with answers
  1. Which two characteristics are the fundamental qualitative characteristics of useful financial information?

    • 1 Comparability and timeliness
    • 2 Prudence and neutrality
    • 3 Relevance and faithful representation
    • 4 Verifiability and understandability
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    Correct answer: Relevance and faithful representation

    The other four enhance usefulness.

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  2. Which of these is a measurement basis in the conceptual framework?

    • 1 Fair value
    • 2 Retained value
    • 3 Budgeted value
    • 4 Nominal profit
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    Correct answer: Fair value

    The bases are historical cost, current cost, value in use or fulfilment value, and fair value.

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  3. A liability is best defined as:

    • 1 Any cost not yet paid
    • 2 A future expense
    • 3 A present obligation to transfer an economic resource as a result of past events
    • 4 The residual interest in assets
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    Correct answer: A present obligation to transfer an economic resource as a result of past events

    The definition requires a present obligation arising from past events.

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  4. Which statement about a principles-based framework is correct?

    • 1 It prevents any choice of policy
    • 2 It gives detailed rules for every case
    • 3 It cannot be used with IFRS Accounting Standards
    • 4 It sets objectives and relies on judgement in applying them
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    Correct answer: It sets objectives and relies on judgement in applying them

    Rules-based frameworks give more detailed requirements, which can be avoided by structuring transactions.

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  5. What is the role of the ISSB?

    • 1 To set standards for sustainability-related disclosures
    • 2 To audit financial statements
    • 3 To set accounting standards for banks only
    • 4 To enforce tax law
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    Correct answer: To set standards for sustainability-related disclosures

    The ISSB is part of the IFRS Foundation.

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  6. Why are intra-group transactions eliminated on consolidation?

    • 1 They are illegal
    • 2 They are always fraudulent
    • 3 They are immaterial
    • 4 The group is treated as a single economic entity
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    Correct answer: The group is treated as a single economic entity

    Transactions within the group do not involve outsiders.

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  7. Which entity is accounted for using the equity method?

    • 1 A subsidiary
    • 2 A branch of the parent
    • 3 A trade investment
    • 4 An associate
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    Correct answer: An associate

    The equity method applies where there is significant influence.

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