Section B question types

Status: Original worked teaching examples, aligned to the 2026–27 detailed study guide and FR examinable documents. This atlas groups distinct decisions a question can test. ACCA can change figures, wording and combine decisions, so no finite set can enumerate every question. Section B consists of three unique cases, each with five independent two-mark objective tests; the examples below are standalone question types, not predictions or copied ACCA questions. ACCA examiner approach.

How to use: For each type, read the fact pattern and question, decide the rule first, then compare the worked answer. All amounts are $ unless stated otherwise. A single case can draw five independent types from one family or several families. Each example is deliberately small; a case may supply more facts than needed.

A. Conceptual and regulatory framework

B-A1 — Conceptual Framework (A1–A2)

Asset or expense? An entity pays 30,000 for an advertising campaign expected to increase sales; it cannot control customers' future purchases. *Question:* Is the spending an asset? Solution: No identifiable present economic resource is controlled as a result of the campaign; expense the 30,000, subject to any separately identifiable prepaid service at reporting date. Expected benefit alone does not establish an asset.
Present obligation? The board plans to close a branch next year but has not announced or begun the plan. *Question:* Is there a liability today? Solution: A plan alone creates no present obligation to another party; no liability solely from the board decision. Reassess if a legal or constructive obligation arises.
Useful-information qualities. Management selects a highly favourable valuation unsupported by observable evidence to make a property figure look current. *Question:* Which fundamental quality is most threatened? Solution: Faithful representation; a current number is useful only if it represents the economic substance without material bias. Relevance alone is insufficient.
Measurement choice. A machine has historical cost 100,000 and current replacement cost 130,000. *Question:* What does each measure represent? Solution: Historical cost reflects the original transaction basis (subsequently adjusted where required); current cost reflects the amount to acquire an equivalent asset at the measurement date. Neither amount is automatically the correct reported carrying amount; the applicable standard and model decide.
Recognition versus disclosure. A lawsuit might create an obligation but the facts do not establish the IAS 37 recognition conditions. *Question:* Does the Conceptual Framework alone mandate recognition? Solution: Apply the specific IAS 37 requirements. The Framework informs reasoning but does not override an applicable standard; a possible obligation may require contingent-liability disclosure rather than recognition.

B-A3 — Regulatory framework (A3)

Why regulate? Two companies use different reporting treatments for identical transactions. *Question:* What is a primary reason for common IFRS standards? Solution: Comparable, decision-useful reporting and reduced scope for inconsistent or self-serving policies. Standards still require judgement and enforcement.
Principles and rules. A proposed system contains broad principles but no application guidance. *Question:* Name one strength and one limitation. Solution: Principles can reflect economic substance across novel transactions; they can also produce inconsistent judgements without suitable guidance, disclosure and enforcement.
Standards are not the whole framework. An entity claims IFRS standards alone guarantee reliable reporting. *Question:* What else matters? Solution: Corporate law/regulation, governance, audit, enforcement and ethical behaviour affect reporting quality. Merely citing a standard does not ensure faithful application.
Standard-setting process. A new accounting issue has emerged. *Question:* Which body issues IFRS Accounting Standards, and why is public consultation used? Solution: The IASB develops and issues IFRS Accounting Standards; consultation and exposure drafts gather evidence and feedback before finalisation. The IFRS Foundation oversees the boards.
National role. A national standard setter comments on an IASB proposal. *Question:* Has it thereby changed an IFRS standard? Solution: No. National bodies can contribute evidence and feedback or determine local adoption, but only the IASB's due process changes an IFRS Accounting Standard.
Sustainability standard setter. A candidate confuses the IASB and ISSB. *Question:* Which board develops IFRS Sustainability Disclosure Standards? Solution: The ISSB. The IASB develops IFRS Accounting Standards. The FR outcome asks for the ISSB's purpose and role, not detailed climate-standard application.

B-A4 — Group concepts (A4)

Control. Investor P owns 45% of S but has contractual power to direct S's relevant activities and exposure to variable returns. *Question:* Can S be a subsidiary despite ownership below 50%? Solution: Yes, if P can use its power to affect its returns. Voting percentage alone is not decisive; confirm all control elements.
Associate. P owns 30% of A and participates in financial and operating policy decisions without control. *Question:* How is A treated in consolidated statements? Solution: Significant influence indicates an associate; apply the equity method, not full line-by-line consolidation.
Intragroup sale. P sells inventory to S and S still holds it. *Question:* Why eliminate P's sale and any unrealised profit? Solution: The group is one economic unit; a transfer within it is not a sale to an external customer, and profit on unsold inventory is not realised externally.
Accounting policies and dates. S uses a different inventory policy from P. *Question:* What is required for consolidation? Solution: Adjust S's information to uniform group accounting policies for like transactions; align reporting dates or make permitted adjustments to achieve comparable group information.
Exemption. A subsidiary's parent is itself part of a larger group. *Question:* Is it always exempt from preparing consolidated accounts? Solution: No. Apply the specific IFRS 10 exemption conditions; the mere existence of a higher parent is insufficient.

B. Transactions — assets and impairment

B-B1a — PPE initial cost (B1)

Capitalise or expense. A machine costs 200,000; delivery 8,000, installation 12,000 and staff training 5,000. *Question:* Initial PPE cost? Solution: 220,000 (200,000 + 8,000 + 12,000). Training is not a directly attributable cost of getting the machine into the condition necessary to operate as intended; expense it.
Self-construction. Direct materials 90,000, direct labour 40,000 and abnormal wastage 6,000. *Question:* Cost before other eligible items? Solution: 130,000; abnormal wastage is expensed, not capitalised.
Borrowing costs. A qualifying building is being constructed using specific borrowings; 12,000 eligible interest accrues while construction is active. *Question:* Treatment? Solution: Capitalise borrowing costs attributable to the qualifying asset during the eligible construction period; do not capitalise interest after the asset is substantially ready for use.
Depreciation start. A machine is ready for intended use on 1 October but first used on 1 December. *Question:* When does depreciation begin? Solution: 1 October, when available for use, not the first day of actual production.

B-B1b — PPE subsequent measurement (B1)

Component replacement. An aircraft engine component with carrying amount 18,000 is replaced by a new 60,000 component meeting recognition criteria. *Question:* Entries? Solution: Derecognise the old component (18,000 loss before proceeds, if none) and recognise the new 60,000 component; do not leave both in PPE.
Revaluation surplus. PPE carrying amount 80,000 rises to fair value 100,000 with no prior loss. *Question:* Where is the 20,000 increase? Solution: Other comprehensive income and revaluation surplus in equity, subject to the rule for reversing a previous revaluation decrease in profit or loss.
Depreciation after revaluation. Asset revalued to 120,000, residual value zero, remaining useful life six years. *Question:* Annual straight-line depreciation? Solution: 20,000 per year from the revalued carrying amount, assuming no later changes.
Disposal. Carrying amount 45,000, sale proceeds 52,000 and selling costs 2,000. *Question:* Gain or loss? Solution: 5,000 gain: net proceeds 50,000 less carrying amount 45,000.

B-B1c — Investment property (B1)

Classification. A building is held solely to earn rentals. *Question:* PPE or investment property? Solution: Investment property under IAS 40, because the purpose is rental income rather than owner occupation.
Fair-value model. Opening fair value 300,000; closing fair value 324,000. *Question:* Treatment? Solution: Carry at 324,000 and recognise the 24,000 gain in profit or loss. Do not depreciate while using the fair-value model.
Cost model. Cost 300,000, residual zero, 30-year life. *Question:* Is depreciation ignored because it is investment property? Solution: No. Under the cost model, apply relevant depreciation and impairment requirements; straight-line depreciation is 10,000 annually on these facts.

B-B2 — Intangible assets (B2)

Research/development cut-off. Project research costs 20,000; 40,000 of development expenditure is incurred before all recognition criteria are demonstrated and 30,000 after. *Question:* Maximum amount capitalised from these costs? Solution: 30,000, assuming the post-criteria spending is directly attributable. The earlier 60,000 is expensed and cannot later be reinstated as an asset.
Purchased versus internal brand. P buys a separable trademark for 50,000; it also estimates its internally built brand at 200,000. *Question:* Which asset is recognised? Solution: Recognise the purchased trademark at cost, subject to the relevant requirements; do not recognise the internally generated brand simply from management's valuation.
Finite useful life. A licence costs 80,000, has an eight-year useful life and zero residual value. *Question:* Annual straight-line amortisation? Solution: 10,000 from when the licence is available for use, unless the consumption pattern requires another method.
Indefinite life. An intangible has no foreseeable limit to useful life. *Question:* Amortise? Solution: Do not amortise while life is indefinite; test for impairment annually and reassess the indefinite-life conclusion each reporting period.

B-B3 — Impairment (B3)

Recoverable amount. Carrying amount 120,000; fair value less costs of disposal 95,000; value in use 102,000. *Question:* Impairment? Solution: Recoverable amount is the higher figure, 102,000; impairment loss is 18,000.
CGU allocation. A CGU loss is 30,000 and includes goodwill of 12,000. *Question:* First allocation? Solution: Reduce goodwill by 12,000 first; allocate the remaining 18,000 to other CGU assets pro rata, subject to individual floors and other restrictions.
Reversal cap. An impaired asset has carrying amount 70,000; revised recoverable amount 95,000; without prior impairment its carrying amount would be 88,000. *Question:* Maximum reversal? Solution: 18,000, raising carrying amount only to 88,000. A goodwill impairment is never reversed.

B-B4 — Inventories and agriculture (B4)

Inventory NRV. Inventory cost 50,000; expected sale proceeds 54,000, completion costs 5,000 and selling costs 2,000. *Question:* Carrying amount? Solution: NRV is 47,000; carry at lower of cost and NRV, 47,000, with a 3,000 write-down.
Biological asset. Livestock fair value 90,000 and costs to sell 4,000 at year-end. *Question:* Measurement? Solution: 86,000 fair value less costs to sell, with the relevant movement in profit or loss; apply the narrow IAS 41 reliability exception only if its conditions are met.
Harvest. Produce is harvested when fair value less costs to sell is 20,000. *Question:* What is its cost for subsequent IAS 2 accounting? Solution: 20,000 becomes deemed cost at harvest; subsequent inventory accounting follows IAS 2.
Bearer plant. A fruit tree produces crops over multiple periods. *Question:* Is the tree itself measured under IAS 41 fair value less costs to sell? Solution: A bearer plant is accounted for under IAS 16; produce growing on it remains within IAS 41.

Sources for this block: IAS 16, IAS 36, IAS 40, IAS 41, plus the ACCA detailed study guide above.

B. Transactions — instruments, liabilities and performance

B-B5a — Financial assets (B5)

Factoring with recourse. Receivables of 100,000 are transferred for 95,000 but the seller must reimburse the factor for customer defaults. *Question:* May the seller simply remove the receivables? Solution: No automatic derecognition. Assess whether substantially all risks and rewards were transferred; continuing significant credit risk points to retaining the receivables and recognising financing for cash received. The precise facts determine the outcome.
Amortised cost. A debt asset is held to collect contractual cash flows solely of principal and interest. *Question:* Likely classification? Solution: Amortised cost, if the relevant IFRS 9 conditions are met; use the effective interest method and assess impairment.
FVOCI debt. A qualifying debt asset is held both to collect and to sell; fair value increases by 6,000. *Question:* Where does the fair-value movement go? Solution: Other comprehensive income for a qualifying FVOCI debt asset, while interest and impairment effects follow IFRS 9 profit-or-loss rules.
FVOCI equity election. A non-trading equity investment has a valid irrevocable FVOCI election. *Question:* Is a fair-value increase reported in profit or loss? Solution: No; it goes to OCI. The election is available for qualifying equity instruments not held for trading and is made at initial recognition.
FVTPL. An investment does not qualify for, or is designated to, an alternative measurement category. Fair value rises 8,000. *Question:* Effect? Solution: Recognise the 8,000 fair-value gain in profit or loss for an FVTPL asset.

B-B5b — Financial liabilities and equity (B5)

Substance of preference shares. An issuer must redeem preference shares for cash on a fixed date. *Question:* Equity or liability? Solution: The unavoidable contractual cash obligation makes the instrument a financial liability in substance, regardless of its share name.
Effective interest. Liability opening carrying amount 95,000, effective rate 10%, cash coupon 6,000. *Question:* Closing carrying amount? Solution: Finance cost 9,500; closing liability 98,500 (95,000 + 9,500 − 6,000).
Convertible debt split. Proceeds of a qualifying compound instrument are 100,000 and the present value of equivalent non-convertible debt is 91,000. *Question:* Initial equity component? Solution: 9,000 residual equity component; liability component 91,000, before transaction-cost allocation.
Ordinary shares. An entity issues ordinary shares for 120,000 with no obligation to repay. *Question:* Finance cost on the proceeds? Solution: No effective-interest finance cost from the ordinary share issue; recognise equity, subject to share capital/premium classification and eligible issue costs.

B-B6a — Lessee leases (B6)

Initial liability. Three annual end-of-year payments of 10,000 have supplied present-value factors 0.91, 0.83 and 0.75. *Question:* Initial lease liability? Solution: 24,900 (9,100 + 8,300 + 7,500), assuming those are the only included payments.
Subsequent liability. Opening lease liability 24,900, interest rate 10% and end-year cash payment 10,000. *Question:* Closing liability? Solution: 17,390 (24,900 + 2,490 interest − 10,000 payment).
Right-of-use depreciation. ROU asset cost 24,900, no ownership transfer, three-year lease term and five-year underlying useful life. *Question:* Annual straight-line depreciation? Solution: 8,300 over the three-year lease term, assuming no purchase option reasonably certain to be exercised and no other changes.
Recognition exemption. A 10-month lease has no purchase option. *Question:* Can the lessee elect a recognition exemption? Solution: It can elect the short-term exemption if the IFRS 16 conditions are met; payments are generally expensed systematically. Also assess low-value exemption where relevant.

B-B6b — Sale and leaseback (B6)

Is there a sale? Seller-lessee transfers an asset but retains control under a repurchase arrangement. *Question:* Recognise a sale gain? Solution: First test IFRS 15 transfer-of-control requirements. If the transfer is not a sale, retain the asset and account for proceeds as a financial liability; no sale gain.
Rights transferred. Asset carrying amount 80,000, fair value and proceeds 100,000; the seller-lessee retains a right of use equal to 40% of fair value. *Question:* Gain recognised at transfer if it qualifies as a sale? Solution: Total gain is 20,000; recognise only the 60% relating to rights transferred, 12,000. The remaining 8,000 relates to retained use and is not an immediate gain. This is a simplified fair-value fact pattern within FR scope.

B-B7a — Provisions and contingencies (B7)

Warranty expected value. 1,000 products sold: 80% no claim, 15% minor repair at 20, 5% major repair at 100. *Question:* Provision? Solution: 8,000: 1,000 × [(0.15 × 20) + (0.05 × 100)]. A sale with warranty obligation occurred; expected value suits a population of similar claims.
Onerous contract. Unavoidable cost of meeting a contract is 70,000; benefits are 50,000; compensation to exit is 12,000. *Question:* Provision for unavoidable loss? Solution: 12,000, the lower cost of fulfilling (20,000 net loss) and exiting (12,000), after considering any impairment of assets used in the contract first.
Restructuring. Management approves a plan internally but has not communicated it or begun implementation. *Question:* Provision? Solution: No constructive obligation yet merely from board approval. A detailed formal plan plus a valid expectation in affected parties is needed.
Contingent asset. An entity has a probable but not virtually certain legal recovery. *Question:* Recognise an asset? Solution: No. Disclose a contingent asset where inflow is probable; recognise only when realisation is virtually certain.
Decommissioning. A legal obligation to restore a site exists when equipment is installed. *Question:* Initial treatment? Solution: Recognise a provision at present value if material and include the corresponding eligible cost in the asset; subsequently unwind discount as finance cost and depreciate the asset component.

B-B7b — Events after reporting period (B7)

Adjusting event. A customer owing 30,000 at year-end enters bankruptcy after year-end; evidence shows severe financial difficulty already existed at year-end. *Question:* Adjust receivables? Solution: Yes. The later bankruptcy confirms a pre-existing condition; adjust the year-end carrying amount for expected loss.
Non-adjusting event. A fire destroys a factory two months after year-end with no pre-existing condition. *Question:* Adjust year-end PPE? Solution: No. Disclose nature and estimated financial effect if material, or state inability to estimate.
Dividend declared later. Directors declare a dividend after reporting date. *Question:* Year-end liability? Solution: No liability at the reporting date merely because it was declared later; disclose if material as appropriate.

B-B8 — Taxation (B8)

Current tax. Taxable profit 200,000 and tax rate 25%; 8,000 of current tax has already been paid. *Question:* Current tax charge and closing payable? Solution: Charge 50,000; payable 42,000, assuming no opening balance or other tax adjustments.
Taxable temporary difference. PPE carrying amount 100,000 and tax base 70,000; tax rate 25%. *Question:* Deferred tax liability? Solution: 7,500 (30,000 taxable temporary difference × 25%), subject to any relevant exceptions.
Deductible temporary difference. Provision carrying amount 20,000; tax deduction arises only on payment; tax rate 25%. *Question:* Potential deferred tax asset? Solution: 5,000, recognised only to the extent that future taxable profit is probable and any relevant exception is satisfied.
Revaluation tax. PPE revaluation gain 40,000 is in OCI and gives rise to a 25% taxable temporary difference. *Question:* Where is the related 10,000 deferred tax charge? Solution: OCI, following the underlying revaluation, with a corresponding deferred tax liability.

B-B9a — Held for sale and discontinued operations (B9)

Classification. An asset is available for immediate sale and its sale is highly probable. *Question:* Held for sale? Solution: Yes if all IFRS 5 criteria are met; a management intention without a committed, highly probable sale is insufficient.
Measurement. Eligible non-current asset carrying amount 90,000; fair value less costs to sell 84,000. *Question:* New amount and depreciation? Solution: Carry at 84,000, recognise a 6,000 loss and cease depreciation while classified held for sale. Apply exceptions to assets excluded from IFRS 5 measurement where relevant.
Discontinued operation. A component is disposed of and represents a separate major line of business. *Question:* Presentation? Solution: Present a single post-tax discontinued-operation amount separately in profit or loss, with required analysis; a disposal of an immaterial ordinary asset does not necessarily qualify.

B-B9b — Policy, estimate and error (B9)

Estimate. Remaining useful life of a machine changes from five to three years after new information. *Question:* Restate past depreciation? Solution: No. Account prospectively by allocating the current carrying amount over the revised remaining life.
Policy change. Entity voluntarily changes an accounting policy and the new policy gives reliable, more relevant information. *Question:* Prospective or retrospective? Solution: Apply retrospectively unless impracticable, restating comparatives and opening equity as required, subject to transition provisions.
Prior-period error. A material expense was omitted last year. *Question:* Charge this year's profit? Solution: Correct retrospectively by restating last year's comparative amounts (or earliest practicable opening balance), rather than treating it as this year's expense.

Basic EPS. Profit attributable to ordinary shareholders 120,000; weighted-average ordinary shares 60,000. *Question:* Basic EPS? Solution: $2.00 per share.
Bonus issue. A one-for-four bonus issue occurs during the year. *Question:* What happens to comparative EPS? Solution: Restate the comparative weighted-average share number for the bonus element as though it had always existed; profit numerator is unchanged.
Rights issue. Shares are issued below market value. *Question:* Why adjust earlier-period shares? Solution: A rights issue has a bonus element; calculate the theoretical ex-rights price and bonus factor, then restate pre-issue and comparative share numbers.
Diluted EPS. Convertible debt would add 10,000 after-tax interest to earnings and 20,000 shares. *Question:* Include it automatically? Solution: Test whether the resulting EPS is lower than basic EPS. Include only if dilutive; use adjusted earnings and shares consistently.
Options. 10,000 options have exercise price below average market price. *Question:* Are all 10,000 added to denominator? Solution: No. Use the treasury-stock method: add only shares issued for no consideration after assuming proceeds buy shares at the average market price.

B-B9d — IFRS S1 overview (B9)

Objective. An entity asks why IFRS S1 disclosures exist. *Question:* What is the high-level aim? Solution: To disclose sustainability-related risks and opportunities useful to primary users in decisions about providing resources to the entity, where they could reasonably affect prospects.
Core content. A report contains only emissions figures. *Question:* What broad areas does IFRS S1 organise disclosures around? Solution: Governance, strategy, risk management, and metrics and targets. FR asks for the overview, not full SBR-level application.

B-D1p — IFRS 18 presentation (D1 cross-cutting)

Mandatory subtotals. A draft statement shows gross profit and profit before tax but no operating profit. *Question:* Is it complete under IFRS 18? Solution: No. Operating profit and profit before financing and income taxes are mandatory defined subtotals, along with profit or loss; gross profit and profit before tax may be shown but are not the mandatory substitutes.
Operating category. Management labels every income item as operating. *Question:* Correct? Solution: Not necessarily. Classify income and expenses in the IFRS 18 operating, investing, financing, income taxes and discontinued-operations categories according to the facts and relevant requirements.
Indirect cash flow. An older template begins with profit before tax. *Question:* What starting subtotal is required by IAS 7 as amended by IFRS 18? Solution: Operating profit or loss. Adjust only relevant non-cash items included in that starting subtotal and working-capital movements.

B-B10 — Revenue: general model (B10)

Separate obligations. A device and a separately usable two-year service are sold together for 1,200. Stand-alone prices are 1,000 and 500. *Question:* Allocate transaction price? Solution: Device 800 (1,200 × 1,000/1,500); service 400 (1,200 × 500/1,500). Recognise each as its performance obligation is satisfied.
Variable consideration. Contract promises a 10,000 bonus if delivery is early, but the outcome is highly uncertain and inclusion would risk a significant revenue reversal. *Question:* Include bonus now? Solution: Constrain the estimate; do not include the uncertain amount in transaction price until the IFRS 15 constraint is met.
Over-time criterion. A customer controls a building as it is constructed. *Question:* Point-in-time or over-time? Solution: Over time if the customer controls the asset as created; measure progress using a method that faithfully depicts performance.
Contract balance. Revenue earned to date 60,000; amounts billed 45,000. *Question:* Contract asset or liability, ignoring receivable distinctions? Solution: A 15,000 contract asset if the right to consideration remains conditional on more than passage of time; an unconditional right is a receivable.
Contract costs. An incremental sales commission is payable only if a contract is won and is expected to be recovered. *Question:* Expense immediately? Solution: Recognise a contract-cost asset under IFRS 15 unless a permitted practical expedient applies, then amortise consistently with transfer of related goods or services.

B-B10b — Revenue: special arrangements (B10)

Principal or agent. A platform arranges a third party's service and never controls it before transfer. *Question:* Gross or net revenue? Solution: Agent revenue is its fee/commission, not the gross customer payment; assess control before transfer.
Repurchase. Seller must repurchase an asset at a specified price. *Question:* Is ordinary revenue necessarily recognised? Solution: No. Assess the repurchase terms and IFRS 15 guidance; a forward or call option generally prevents the customer obtaining control and may produce a lease or financing arrangement.
Bill-and-hold. Customer is billed but goods remain at seller's premises. *Question:* Is billing alone sufficient? Solution: No. Assess whether the arrangement has a substantive reason, goods are separately identified and ready for transfer, and the seller cannot redirect them, alongside control criteria.
Consignment. Dealer can return unsold goods and supplier retains control until sale to end customer. *Question:* When does supplier recognise revenue? Solution: When control transfers to the end customer, not when goods are delivered to dealer.

B-B11 — Government grants (B11)

Recognition threshold. Government offers a grant subject to conditions that the entity cannot yet demonstrate it will satisfy. *Question:* Recognise income? Solution: No, until there is reasonable assurance that the conditions will be met and the grant received.
Expense grant. 30,000 grant compensates three years of eligible training costs, evenly incurred. *Question:* Annual income? Solution: 10,000 each year to match the related costs, assuming the grant conditions are met.
Asset grant. 50,000 grant relates to an asset with a five-year life. *Question:* Is all 50,000 immediate profit? Solution: No. IAS 20 permits deferred-income or deduction-from-asset presentation; recognise the benefit systematically over the asset's useful life. Under deferred income, 10,000 is released annually on these facts.

B-B12 — Foreign currency (B12)

Initial transaction. Goods cost €10,000 when $1 = €0.80. *Question:* Initial $ amount? Solution: $12,500 (€10,000 ÷ 0.80), assuming $ is functional currency.
Monetary retranslation. The €10,000 payable remains unpaid at year-end when $1 = €0.75. *Question:* Closing payable and exchange effect? Solution: $13,333.33 (€10,000 ÷ 0.75); exchange loss $833.33 versus initial $12,500, in profit or loss unless a specific exception applies.
Historical-cost non-monetary item. Inventory bought for €10,000 remains unsold. *Question:* Retranslate its historical cost at closing rate? Solution: No. Historical-cost non-monetary items retain the transaction-date translation; other measurement requirements, such as NRV, are assessed separately.
Fair-value non-monetary item. A non-monetary asset's fair value is measured in foreign currency on 31 December. *Question:* Which exchange rate translates that fair value? Solution: The rate at the date fair value was measured; the resulting difference follows the accounting treatment of the underlying gain or loss.

Sources for this block: ACCA IFRS 18 technical article, IFRS Foundation summaries of IAS 7, IFRS 5, IFRS 15 and IFRS 16, plus the detailed study guide.

C–D. Analysis and preparation in Section B

B-C1–C3 — Analysis and limitations (C1–C3)

Ratio calculation. Revenue 500,000 and gross profit 150,000. *Question:* Gross margin? Solution: 30% (150,000/500,000); calculate on comparable figures before explaining the movement.
Trend interpretation. Revenue rises 20% while operating profit falls 10%, and the entity opened new stores. *Question:* What is a supported conclusion? Solution: Sales growth has not translated into operating profit; start-up or operating costs of new stores may explain the decline, but verify with expense and segment data rather than asserting cause as fact.
Cash versus profit. Profit improves, but operating cash inflow falls while receivables increase sharply. *Question:* What does this suggest? Solution: Cash collection/credit quality warrants investigation; profits include accruals. Examine receivable days, ageing and other cash-flow items before concluding customers cannot pay.
Comparability. One entity revalued its PPE; the comparator uses historical cost. *Question:* Is return on capital employed directly comparable? Solution: No. A higher revalued asset denominator can depress the ratio without poorer operations; adjust or explain the policy/value difference.
Year-end snapshot. A retailer has low inventory on its year-end date after peak holiday trading. *Question:* Can closing inventory alone represent average stock? Solution: Not reliably; seasonality can distort efficiency and liquidity measures. Use average balances if suitable data exist and explain the limitation.
EPS limitation. Profit rises due to one-off disposal gain while EPS rises. *Question:* Does EPS prove sustainable improvement? Solution: No. Explain the one-off item, changes in share count and the limits of EPS before assessing underlying performance.

B-C4 — Not-for-profit/public sector interpretation (C4)

Objective. A charity reports a surplus but fewer clients served. *Question:* Has performance necessarily improved? Solution: No. Assess service outcomes, reach, quality and resources against its mission; a surplus is not the sole goal.
Stakeholder measure. A public clinic's cost per patient rises as it treats more complex cases. *Question:* Is the rise automatically inefficiency? Solution: No. Case mix and quality affect cost; compare service outcomes and complexity before drawing a conclusion.

B-D1 — Single-entity preparation (D1)

Adjustment routing. Trial balance includes unrecorded depreciation 10,000. *Question:* What statements change? Solution: Depreciation expense lowers profit/retained earnings by 10,000 and accumulated depreciation lowers PPE carrying amount by 10,000.
Equity reconciliation. Opening retained earnings 100,000, profit 30,000 and dividends paid 8,000. *Question:* Closing retained earnings? Solution: 122,000 (100,000 + 30,000 − 8,000), ignoring other adjustments.
Statement of changes in equity. A 20,000 revaluation surplus arises and no transfer is made. *Question:* Where is it shown? Solution: OCI and the revaluation-surplus column in the statement of changes in equity, subject to related tax and previous revaluation losses.
Cash-flow extract. Operating profit 100,000 includes depreciation 15,000; receivables increase 8,000, inventories decrease 3,000, payables increase 4,000. *Question:* Cash from operating activities before income taxes, ignoring other items? Solution: 114,000 = 100,000 + 15,000 − 8,000 + 3,000 + 4,000. Start with operating profit under IFRS 18.
Presentation. Draft profit or loss puts all interest, tax and discontinued-operation results into operating profit. *Question:* Is that acceptable? Solution: No. Apply IFRS 18 category and subtotal requirements to each item using the facts; reconcile profit or loss and OCI with equity.

B-D2 — Simple group preparation (D2)

Goodwill, proportionate NCI. P buys 80% of S for 120,000; acquisition-date identifiable net assets at fair value are 100,000; NCI is measured as proportionate net assets. *Question:* Goodwill? Solution: 40,000 = consideration 120,000 + NCI 20,000 − net assets 100,000.
Goodwill, fair-value NCI. Same facts, but NCI fair value is 27,000. *Question:* Goodwill? Solution: 47,000 = 120,000 + 27,000 − 100,000. The chosen NCI basis changes goodwill.
Post-acquisition reserves. S retained earnings rise from 40,000 at acquisition to 70,000 at reporting date; P owns 80%. *Question:* P's share of post-acquisition increase before other adjustments? Solution: 24,000 = 80% × 30,000; account separately for fair-value depreciation, intra-group profit and impairment where present.
Unrealised inventory profit. P sells goods to S for 125,000 at cost 100,000; 40% remain unsold externally. *Question:* Unrealised profit? Solution: 10,000 = 25,000 profit × 40%; remove it from group inventory and group profit. If the seller is S, allocation between parent and NCI differs.
Intragroup balance. P records 20,000 receivable from S; S records matching payable. *Question:* Group presentation? Solution: Eliminate both balances, subject to reconciling any cash in transit or mismatch.
Associate. Group buys 30% of A for 50,000; A earns 20,000 after acquisition and pays no dividend. *Question:* Investment carrying amount before other adjustments? Solution: 56,000 = 50,000 + 30% × 20,000, subject to impairment and relevant equity-method adjustments.
Midyear acquisition. P controls S from 1 July; both have 31 December year-ends. *Question:* Include a full year of S's profit in consolidated profit or loss? Solution: No; include S's results from acquisition date only, with pre-acquisition profit used in acquisition-date net assets.
Full disposal. P sells all of S during the year. *Question:* Continue consolidating S to year-end? Solution: No; consolidate S only until control is lost, then account for disposal and consider whether it qualifies as a discontinued operation. FR scope restricts this disposal outcome to the parent's entire investment.

Sources for this block: ACCA detailed FR study guide, examiner approach, FR FAQ and IFRS 18 technical article.

Additional decision variants across the same families

These extend the question-type coverage where the detailed study guide calls for a different decision from the primary examples. They can be combined with the cases above.

A1–A4 extensions

A1 enhancing qualities. Two reports are equally relevant and faithfully represented, but one is published much later. *Question:* Which enhancing characteristic is weaker? Solution: Timeliness; delayed information may be less useful for decisions. Comparability, verifiability and understandability are other enhancing qualities.
A2 value in use. An asset's expected future cash flows are discounted from continued use and ultimate disposal. *Question:* Which measurement basis is being estimated? Solution: Value in use, an entity-specific current-value measure; it is not necessarily fair value, which reflects market-participant assumptions.
A2 fulfilment value. A liability is measured using the present value of resources the entity expects to transfer to fulfil it. *Question:* Which measure? Solution: Fulfilment value, an entity-specific current-value measure for a liability.
A4 reporting exemption. A parent wishes to omit consolidation because it has only one subsidiary. *Question:* Is that reason sufficient? Solution: No. Apply the specific IFRS 10 exemption conditions; the number of subsidiaries by itself does not remove the consolidation requirement.

B1–B4 extensions

B1 revaluation decrease. PPE carrying amount 100,000 falls to 92,000 and has no existing revaluation surplus for that asset. *Question:* Where is the 8,000 decrease? Solution: Profit or loss. A decrease can be recognised in OCI only to the extent of an existing surplus for that asset.
B1 subsequent expenditure. A machine receives routine annual servicing of 6,000. *Question:* Add to PPE? Solution: Expense routine maintenance; capitalise only qualifying replacement or enhancement costs, derecognising replaced components where identifiable.
B1 investment-property transfer. Owner-occupied property starts being leased to an external tenant. *Question:* Is management's intention alone enough to reclassify? Solution: Classification changes when actual use changes; identify the transfer date and apply IAS 40 and IAS 16 measurement rules for the chosen models.
B2 goodwill versus separable intangible. A business combination includes a customer relationship that can be separately identified and reliably measured. *Question:* Leave it all within goodwill? Solution: No. Recognise an identifiable intangible separately where IFRS 3/IAS 38 criteria are met; goodwill is residual.
B3 impairment indicator. A major adverse technological change makes equipment obsolete. *Question:* What action? Solution: Assess recoverable amount because an external impairment indicator exists, then recognise a loss if carrying amount exceeds recoverable amount.
B3 goodwill test. A cash-generating unit contains goodwill but has no visible impairment indicator. *Question:* Can annual testing be skipped? Solution: No. Goodwill is tested for impairment annually and when indicators arise.
B4 inventory cost. An entity chooses the highest purchase price for identical interchangeable units simply to reduce profit. *Question:* Is arbitrary item selection acceptable? Solution: No. Use an IAS 2 permitted cost formula such as FIFO or weighted average consistently for interchangeable items; specific identification is for non-interchangeable items.

B5–B9 extensions

B5 factoring without recourse. All substantive credit risk and rewards are transferred and no control is retained. *Question:* Continue reporting receivables? Solution: Generally derecognise them if IFRS 9 derecognition tests are satisfied; assess any retained interest or servicing separately.
B5 FVOCI equity disposal. A qualifying elected equity investment is sold. *Question:* Recycle accumulated FVOCI gain through profit or loss? Solution: No. The accumulated amount may be transferred within equity, but not recycled to profit or loss.
B6 low-value lease. An individual low-value laptop is leased for three years. *Question:* Is the short-term exemption needed? Solution: No; the separate low-value asset exemption may be elected if its conditions are met, even though the lease exceeds 12 months.
B7 contingent liability. A present obligation has a possible rather than probable outflow. *Question:* Provision? Solution: No provision on those facts; disclose a contingent liability unless the possibility of outflow is remote.
B7 material discounting. A restoration payment of 121,000 is due in two years; discount rate 10%. *Question:* Initial provision? Solution: 100,000 = 121,000/1.1², if the present-obligation recognition conditions are met. Unwind discount subsequently.
B8 unused tax loss. A company has tax losses but no credible taxable-profit forecast. *Question:* Automatically recognise a deferred tax asset? Solution: No. Recognition requires probable future taxable profit against which the loss can be used.
B9 material expense. A large restructuring charge is buried in a generic expense line. *Question:* What presentation issue arises? Solution: Material items may require separate disclosure of nature and amount so users understand performance; do not label it an extraordinary item.
B9 full-market share issue. Ordinary shares are issued for full market value partway through the year. *Question:* Restate prior shares like a bonus issue? Solution: No bonus element; include the new shares in weighted average from the issue date, without bonus restatement.

B10–B12, C and D extensions

B10 progress measure. A construction obligation qualifies for over-time recognition and costs incurred faithfully depict progress. *Question:* How calculate progress? Solution: A suitable input method can use qualifying costs incurred divided by expected total qualifying costs; exclude costs that do not depict performance and revisit estimates.
B10 point-in-time transfer. Goods are shipped but the seller still controls them under the contract. *Question:* Recognise revenue merely on dispatch? Solution: No. Recognise when the customer obtains control; delivery terms, acceptance and other indicators matter.
B11 grant repayment. A grant becomes repayable after a condition is breached. *Question:* Ignore it because income was recognised earlier? Solution: No. Apply IAS 20 repayment treatment to deferred income or asset carrying amount and recognise any excess appropriately.
B12 functional versus presentation currency. Entity's primary economic environment uses euros but reports to shareholders in dollars. *Question:* Which is functional? Solution: The euro if the primary economic environment indicators support it; dollar may be presentation currency. FR's transaction translation outcome should not be confused with full foreign-subsidiary translation.
C1–C3 stakeholder lens. A lender and an ordinary shareholder analyse the same gearing increase. *Question:* Must conclusions be identical? Solution: No. A lender focuses on debt service and downside protection; shareholders may weigh growth returns against risk. Both must use the same facts and acknowledge limitations.
D1 statement of changes in equity. A company issues shares at a premium and pays dividends. *Question:* Where are these shown? Solution: Show share capital and premium movements separately and deduct distributions from retained earnings within the statement of changes in equity; dividends are not profit-or-loss expenses.
D2 fair-value liability. A subsidiary has an identifiable contingent liability meeting IFRS 3 acquisition recognition requirements but absent from its own books. *Question:* Ignore it in acquisition net assets? Solution: No. Include its acquisition-date fair value where recognition criteria are met; this reduces net assets and affects goodwill and later group results.
D2 intra-group PPE transfer. Parent sells PPE to subsidiary at a gain while the group still uses it. *Question:* Group adjustment? Solution: Remove the intra-group gain, restore the asset to the group's pre-transfer carrying basis and correct subsequent depreciation; allocation depends on which entity sold the asset.
D2 intra-group dividend. S pays P a dividend recorded as income by P. *Question:* Group profit? Solution: Eliminate P's intra-group dividend income on consolidation and adjust NCI for its share of S's distribution; a group's receipt from itself is not external income.
D2 bargain purchase. Consideration plus NCI is 90,000 but acquisition-date net identifiable assets are 100,000. *Question:* Immediate goodwill of negative 10,000? Solution: Reassess all measurements first. If a genuine bargain remains, recognise the 10,000 gain in profit or loss, not negative goodwill as an asset.
D2 two subsidiaries. Parent controls two subsidiaries and has one associate. *Question:* Must all three be added line by line? Solution: Consolidate each subsidiary line by line for periods of control; equity-account the associate as a single investment and share of result, within the simple-group syllabus limit.

These extensions target decisions otherwise easily hidden inside a broad family. The complete set remains an outcome-led study atlas rather than a claim that ACCA can ask only these formulations.