REVISION QUESTION BANK PDF

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June 2015 Edition E PL REVISION QUESTION BANK ACCA Paper F7 | FINANCIAL REPORTING M SA Becker Professional Education has more than 20 years of experience providing lectures and learning tools for ACCA Professional Qualifications. We offer ACCA candidates high-quality study materials to maximise thei...

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June 2015 Edition

REVISION QUESTION BANK

ACCA

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Paper F7 | FINANCIAL REPORTING

Becker Professional Education has more than 20 years of experience providing lectures and learning tools for ACCA Professional Qualifications. We offer ACCA candidates high-quality study materials to maximise their chances of success.

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Study System: Gives complete coverage of the syllabus with a focus on learning outcomes. It is designed to be used both as a reference text and as part of integrated study. It also includes the ACCA Syllabus and Study Guide, exam advice and commentaries and a Study Question Bank containing practice questions relating to each topic covered. Revision Question Bank: Exam style and standard questions together with comprehensive answers to support and prepare students for their exams. The Revision Question Bank also includes past examination questions (updated where relevant), model answers and alternative solutions and tutorial notes.

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Revision Essentials*: A condensed, easy-to-use aid to revision containing essential technical content and exam guidance. *Revision Essentials are substantially derived from content reviewed by ACCA’s examining team.

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ACCA

PAPER F7

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FINANCIAL REPORTING

REVISION QUESTION BANK

For Examinations to June 2015

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(i)

No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the author, editor or publisher. This training material has been prepared and published by Becker Professional Development International Limited: 16 Elmtree Road Teddington TW11 8ST United Kingdom

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Copyright ©2014 DeVry/Becker Educational Development Corp. All rights reserved. The trademarks used herein are owned by DeVry/Becker Educational Development Corp. or their respective owners and may not be used without permission from the owner.

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Acknowledgement

Past ACCA examination questions are the copyright of the Association of Chartered Certified Accountants and have been reproduced by kind permission.

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REVISION QUESTION BANK – FINANCIAL REPORTING (F7) CONTENTS Question

Page

Answer

Marks Date worked

1 2 4 6 8 10 11 15 17 19 21 22 23

1001 1001 1002 1002 1003 1003 1003 1004 1006 1007 1007 1008 1008

14 18 10 18 12 10 28 10 18 12 12 10 20

26 27 29

1009 1009 1010

10 10 10

31 33 35 37 39 41 42 45 48 51 53 55 58

1011 1011 1012 1013 1014 1014 1015 1016 1017 1019 1019 1021 1022

16 12 12 18 10 10 18 18 22 12 14 22 22

MULTIPLE CHOICE QUESTIONS

15 16 17

E

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18 19 20 21 22 23 24 25 26 27 28 29

International Financial Reporting Standards Conceptual Framework Substance over Form IAS 1 Presentation of Financial Statements Accounting Policies IAS 18 Revenue Inventory and Biological Assets IAS 11 Construction Contracts IAS 16 Property, Plant and Equipment IAS 23 Borrowing Costs Government Grants IAS 40 Investment Properties IAS 38 Intangible Assets Non-current Assets Held for Sale and Discontinued Operations IAS 36 Impairment of Assets IAS 17 Leases IAS 37 Provisions, Contingent Liabilities and Contingent Assets IAS 10 Events after the Reporting Period IAS 12 Income Taxes Financial Instruments Regulatory Framework Consolidated Statement of Financial Position Consolidation Adjustments Further Consolidation Adjustments Consolidated Statement of Comprehensive Income Investments in Associates Analysis and Interpretation IAS 7 Statement of Cash Flows IAS 33 Earnings per Share

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1 2 3 4 5 6 7 8 9 10 11 12 13 14

Section B of the Examination will include two 15 mark questions and one 30 mark question as shown in the Specimen Exam reproduced in this Revision Question Bank. Questions with different mark allocations are not current exam style but provided for additional syllabus coverage. INTERNATIONAL FINANCIAL REPORTING STANDARDS 1

Standard setting process (ACCA D04 adapted)

63

1025

15

63 63

1026 1027

15 15

65

1029

15

CONCEPTUAL FRAMEWORK 2 3

Period of inflation Rebound (ACCA J11)

SUBSTANCE OVER FORM 4

Wardle (ACCA J10)

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FINANCIAL REPORTING (F7) – REVISION QUESTION BANK Question

Page

Answer

Marks Date worked

66 68 70 72 74

1031 1032 1036 1040 1043

15 30 30 30 30

76 77

1047 1048

15 15

78

1050

15

IAS 1 PRESENTATION OF FINANCIAL STATEMENTS 5 6 7 8 9

Dexon (ACCA J08 adapted) Pricewell (ACCA J09 adapted) Sandown (ACCA D09 adapted) Cavern (ACCA D10 adapted) Highwood (ACCA J11 adapted)

ACCOUNTING POLICIES Emerald (ACCA D07 adapted) Tunshill (ACCA D10)

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10 11

IAS 18 REVENUE Derringdo (ACCA J03 adapted)

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12

IAS 11 CONSTRUCTION CONTRACTS 13 14

Linnet (ACCA J04) Mocca (ACCA J11)

79 80

1052 1054

15 10

81 81

1055 1056

10 10

82

1057

15

83

1059

15

84 85

1060 1062

15 15

86

1063

10

86

1064

15

87

1066

15

IAS 16 PROPERTY, PLANT AND EQUIPMENT 15 16

Dearing (ACCA D08) Flightline(ACCA J09)

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IAS 20 ACCOUNTING FOR GOVERNMENT GRANTS 17

Baxen (ACCA J12 adapted)

IAS 23 BORROWING COSTS 18

Apex (ACCA J10 adapted)

IAS 38 INTANGIBLE ASSETS 19 20

IFRS 5 21

Dexterity (ACCA J04 adapted) Darby (ACCA D09)

DISCONTINUED OPERATIONS Manco (ACCA D10)

IAS 36 IMPAIRMENT OF ASSETS 22

Wilderness (ACCA D05 adapted)

IAS 17 LEASES 23

(iv)

Fino (ACCA D07)

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REVISION QUESTION BANK – FINANCIAL REPORTING (F7) Question

Page

Answer

Marks Date worked

88 88

1068 1069

15 15

89

1070

15

IAS 37 PROVISIONS 24 25

Promoil (ACCA D08) Borough (ACCA D11)

IAS 10 EVENTS AFTER THE REPORTING PERIOD 26

Waxwork (ACCA J09)

27 28

Pingway (ACCA J08 adapted) Bertrand (ACCA D11)

GROUP ACCOUNTS Parentis (ACCA J07 adapted) Patronic (ACCA J08 adapted) Pedantic (ACCA D08) Pacemaker (ACCA J09 adapted) Pandar (ACCA D09 adapted) Premier (ACCA D10 adapted) Prodigal (ACCA J11 adapted) Paladin (ACCA D11)

90 91

1071 1073

15 10

91 93 95 97 99 101 103 104

1074 1077 1079 1082 1085 1087 1091 1093

30 15 30 30 25 30 20 25

106 109 111

1095 1098 1100

30 20 25

114 116

1102 1104

15 15

118 119

1106 1107

15 10

120 121 122

1108 1110 1112

15 15 15

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29 30 31 32 33 34 35 36

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FINANCIAL INSTRUMENTS

ANALYSIS AND INTERPRETATION

Harbin (ACCA D07 adapted) Victular (ACCA D08 adapted) Hardy (ACCA D10)

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37 38 39

IAS 7 STATEMENT OF CASH FLOWS 40 41

Crosswire (ACCA D09 adapted) Deltoid (ACCA J10 adapted)

IAS 33 EARNINGS PER SHARE 42 43

Savoir (ACCA J06) Barstead (ACCA D09)

COMPOSITE IFRS QUESTIONS 44 45 46

Toogood (ACCA J07 adapted) Errsea I (ACCA J07 adapted) Errsea II (ACCA J07 adapted)

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FINANCIAL REPORTING (F7) – REVISION QUESTION BANK Question

Page

Answer

Marks Date worked

123 125 127

1114 1118 1120

30 15 15

129

1122

15

June 2012 1 Pyramid (see Specimen Exam) 2 Fresco (adapted) 3 Tangier (adapted) 4 Telepath December 2012 1 Viagem (adapted) 2 Quincy (see Specimen Exam) 3 Quartile (adapted) 4 Lobden (adapted) 5 Shawler

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RECENT EXAMS

130 131 133

1123 1124 1126

15 15 15

135 136 138 140 142

1128 1130 1134 1135 1136

15 30 15 15 15

143 145 146 148 150 151

1138 1141 1144 1145 1148 1149

30 15 15 15 15 15

Multiple Choice Questions

2

17

40

Tangier Pyramid Quincy

8 10 12

19 20 21

15 15 30

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June 2013 1 Paradigm (adapted) 2 Atlas (adapted) 3A Monty I (adapted) 3B Monty II (adapted) 4 Radar 5 Not reproduced

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December 2013 1 Polestar (adapted) 2 Moby (adapted) 3A Kingdom I (adapted) 3B Kingdom II (adapted) 4 Laidlaw (adapted) 5 Fundo SPECIMEN EXAMINATION Section A Section B 1 2 3

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REVISION QUESTION BANK MCQ – FINANCIAL REPORTING (F7) 1

INTERNATIONAL FINANCIAL REPORTING STANDARDS

1.1

Which ONE of the following is NOT a function of the IASB? A B C D

Which ONE of the following is NOT part of the process of developing a new International Financial Reporting Standard?

1.3

Whose needs are general purpose financial statements intended to meet? A B C D

1.4

Issuing a discussion paper that sets out the possible options for a new standard Publishing clarification of an IFRS where conflicting interpretations have developed Drafting an IFRS for public comment Analysing the feedback received on a discussion paper

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A B C D

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1.2

Responsibility for all IFRS technical matters Publication of IFRSs Overall supervisory body of the IFRS organisations Final approval of interpretations by the IFRS Interpretations Committee

Shareholders of incorporated entities The general public Users of financial statements Regulatory authorities

Which body develops International Financial Reporting Standards? IASB IFRS Foundation IFRS IC IFRS Advisory Council

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A B C D

1.5

According to the International Accounting Standards Board, in whose interests are financial reporting standards issued? A B C D

1.6

Company directors The public Company auditors The government

The issue of a new IFRS means that:

(1) (2) (3) (4)

An existing standard may be partially or completely withdrawn. Issues that are not in the scope of an existing standard are covered. Issues raised by users of existing standards are explained and clarified. Current financial reporting practice is modified.

Which combination of the above will most likely be the result of issuing a new IFRS? A B C D

1, 2 and 3 only 2, 3 and 4 only 1, 3 and 4 only 1, 2 and 4 only

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1

FINANCIAL REPORTING (F7) – REVISION QUESTION BANK MCQ 1.7

Which ONE of the following is one of the “3Es” in the “value for money” concept? A B C D

Earnings Equity Evaluation Effectiveness (14 marks)

CONCEPTUAL FRAMEWORK

2.1

Which ONE of the following is stated as an underlying assumption according to the IASB’s Conceptual Framework for Financial Reporting? A B C D

The International Accounting Standards Board’s uses the Conceptual Framework for Financial Reporting (Framework) to assist in developing new standards.

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2.2

Neutrality Accruals Relevance Going concern

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2

Which one of the following is NOT covered by the Framework? A B C D

An item meets the definition of an element in accordance with the Conceptual Framework for Financial Reporting.

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2.3

The format of financial statements The objective of financial statements Concepts of capital maintenance The elements of financial statements

Which of the following criteria must be met for item to be recognised in the financial statements?

2

(1)

It is probable that any future economic benefit associated with the item will flow to or from the entity.

(2)

The item has a cost or value that can be measured with reliability.

(3)

The rights or obligations associated with the item are controlled by the reporting entity.

A B C D

1 only 2 only 1 and 2 only 1, 2 and 3

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REVISION QUESTION BANK MCQ – FINANCIAL REPORTING (F7)

Faithful representation means that the legal form of a transaction must be reflected in financial statements, regardless of the economic substance.

(2)

Under the recognition concept only items capable of being measured in monetary terms can be recognised in financial statements.

(3)

It may sometimes be necessary to exclude information that is relevant and reliable from financial statements because it is too difficult for some users to understand.

A B C D

1 only 2 only 3 only None of these statements

Which of the following statements are correct?

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(1)

(1)

The money measurement concept requires all assets and liabilities to be accounted for at original (historical) cost.

(2)

Faithful representation means that the economic substance of a transaction should be reflected in the financial statements, not necessarily its legal form.

(3)

The realisation concept means that profits or gains cannot normally be recognised in the statement of profit or loss until cash has been received.

A B C D

1 and 2 only 1 and 3 only 2 and 3 only All three statements

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2.5

Which of the following statements about the characteristics of financial information is correct?

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2.4

2.6

IFRS 13 Fair Value Measurement sets out a fair value hierarchy that categorises inputs into three levels. Which of the following inputs would have the highest authority? A B C D

2.7

Unobservable inputs Directly observable inputs other than quoted prices Quoted prices in active markets at the measurement date Market-corroborated inputs

The following are possible methods of measuring assets and liabilities other than historical cost: (1) (2) (3) (4)

Current cost Realisable value Present value Replacement cost

According to the IASB’s Conceptual Framework for Financial Reporting which of the measurement bases above can be used by an entity for measuring assets and liabilities shown in its statement of financial position? A B C D

1 and 2 only 1, 2 and 3 only 2 and 3 only All four

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3

FINANCIAL REPORTING (F7) – REVISION QUESTION BANK MCQ 2.8

The IASB’s Conceptual Framework for Financial Reporting identifies qualitative characteristics of financial statements.

Relevance Understandability Faithful representation Comparability

A B C D

1 and 2 only 1 and 3 only 2 and 4 only 3 and 4 only

Which of the following is the underlying assumption in the International Accounting Standards Board’s Conceptual Framework for Financial Reporting? A B C D

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2.9

(1) (2) (3) (4)

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Which TWO of the following characteristics are fundamental qualitative characteristics according to the IASB’s Framework?

Accruals Reliability Going concern Relevance

(18 marks)

SUBSTANCE OVER FORM

3.1

In which of the following accounting treatments is the qualitative characteristic of faithful representation being applied?

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3

A B C D

3.2

4

An asset is depreciated on the straight-line basis The costs of a patent are capitalised An asset acquired through a finance lease is capitalised by the buyer An allowance is made for irrecoverable trade receivables

Which of the following are examples of transactions which could be used to create “offbalance sheet finance”?

(1) (2) (3) (4)

Sale and repurchase arrangements Factoring of debts Warranty provisions Consignment inventories

A B C D

1, 2 and 3 2, 3 and 4 1, 3 and 4 1, 2 and 4