FR: Financial Reporting

• Topic 01

  The Conceptual and Regulatory Framework for Financial Reporting

  256 questions
• Topic 02

  Accounting for Transactions in Financial Statements

  229 questions
• Topic 03

  Analysing and Interpreting Financial Statements

  217 questions
• Topic 04

  Preparation of Financial Statements

  198 questions
• Topic 05

  Employability and Technology Skills

  228 questions

A few questions from this unit, with the answer and a full explanation. The complete bank is available when you start practising.

1. Nu Co operates an online marketplace. Suppliers list products on the platform. When a customer places an order, Nu Co collects the payment and passes 85% to the supplier, retaining a 15% commission. Nu Co does not take title to or physical possession of the goods. The supplier is responsible for returns and warranty claims. Is Nu Co a principal or an agent, and how should it recognise revenue?

   • A
     Nu Co is a principal because it operates the platform through which the sale takes place
   • B
     Nu Co is a principal because it collects the full payment from the customer
   • C
     Nu Co is an agent and should recognise revenue at the net amount (the 15% commission), because it does not control the goods before they are transferred to the customer
     Correct answer
   • D
     Nu Co is an agent but should recognise revenue at the gross amount with the 85% payment to suppliers as a cost of sales
   Explanation

   Nu Co does not control the goods before they are transferred to the customer — it does not take title, does not have physical possession, and the supplier bears the returns and warranty risk. These indicators confirm that Nu Co is an agent. As an agent, Nu Co recognises revenue at the net amount — the 15% commission, not the gross amount collected from the customer.

2. Which of the following items recognised in OCI is NOT reclassified (recycled) to profit or loss in a subsequent period?

   • A
     Exchange differences arising on translation of a foreign operation under IAS 21
   • B
     Share of OCI of associates accounted for using the equity method under IAS 28
   • C
     Remeasurements of defined benefit plans under IAS 19
     Correct answer
   • D
     All items recognised in OCI are eventually reclassified to profit or loss
   Explanation

   OCI items fall into two categories: those that are reclassified to profit or loss in later periods and those that are not reclassified. Remeasurements of defined benefit plans under IAS 19 are never reclassified to profit or loss — they remain in OCI and are transferred directly to retained earnings. Similarly, IAS 16 revaluation surpluses are not reclassified (they transfer to retained earnings as the asset is used or disposed of). In contrast, foreign currency translation differences (IAS 21) and FVOCI debt instrument gains/losses (IFRS 9) are reclassified on disposal.

3. Under IAS 10, what is a non-adjusting event after the reporting period?

   • A
     An event that is indicative of conditions that arose after the reporting date
     Correct answer
   • B
     An event that always requires adjustment to the financial statements
   • C
     An event that only affects the cash flow statement
   • D
     An event that provides evidence of conditions that existed at the reporting date
   Explanation

   A non-adjusting event is one that indicates conditions that arose after the reporting date. Such events do not provide evidence about conditions at the reporting date, so the financial statements are not adjusted. However, if the event is material, IAS 10 requires disclosure of the nature of the event and an estimate of its financial effect (or a statement that such an estimate cannot be made). Examples include a major business combination, major restructuring, natural disaster, or a significant decline in market values after the reporting date.

• acca

  ACCA FR (Financial Reporting): How to Pass and What to Expect

  2026-01-12