ACCA Financial Reporting (FR)
Original Study Notes & Exam Revision Guide
Syllabus-focused notes for revision. This is an original study resource and is not a reproduction of Kaplan, BPP, or
other copyrighted study texts.
Contents
1. Financial statements & conceptual framework
2. IAS 2 Inventories
3. IAS 16 PPE
4. IAS 36 Impairment
5. IAS 37 Provisions
6. IAS 38 Intangibles
7. IFRS 15 Revenue
8. IFRS 16 Leases
9. IFRS 9 Financial instruments
10. IAS 12 Deferred tax
11. IAS 7 Cash flows
12. Consolidation & goodwill
13. Associates
14. Analysis & ratios
15. Exam technique
ACCA FR Study Notes — Page 1
1. Financial statements & conceptual framework
Purpose
Financial reporting provides useful information to existing and potential investors, lenders and other creditors when
making decisions about providing resources.
Qualitative characteristics
Useful information should be relevant and faithfully represented. Comparability, verifiability, timeliness and
understandability enhance usefulness.
Elements
Assets are present economic resources controlled as a result of past events. Liabilities are present obligations to
transfer an economic resource. Equity is the residual interest in assets after liabilities.
Recognition
Recognise an item when doing so provides useful information and the resulting measurement faithfully represents
the item. Apply the relevant IFRS requirements.
2. IAS 2 Inventories
Measurement
Inventories are measured at the lower of cost and net realisable value (NRV).
Cost
Include purchase costs, conversion costs and other costs incurred to bring inventories to their present location and
condition.
NRV
Estimated selling price less estimated costs of completion and costs necessary to make the sale.
Exam point
A write-down to NRV is recognised as an expense. Reversals are recognised when NRV subsequently increases,
limited to the original write-down.
3. IAS 16 Property, plant and equipment
Initial recognition
Recognise PPE when future economic benefits are probable and cost can be measured reliably.
Cost
Purchase price plus directly attributable costs and, where applicable, the present value of dismantling/restoration
obligations.
Subsequent measurement
Choose cost model or revaluation model by class of asset. Depreciable amount is allocated systematically over
useful life.
Depreciation
Review useful life, residual value and depreciation method at least at each reporting date; changes are accounting
estimates.
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4. IAS 36 Impairment
Basic rule
An asset must not be carried above its recoverable amount.
Recoverable amount
Higher of fair value less costs of disposal and value in use.
Loss
If carrying amount exceeds recoverable amount, recognise an impairment loss, subject to the specific rules for the
asset.
CGUs
Goodwill is allocated to cash-generating units or groups of units expected to benefit from synergies and tested for
impairment.
5. IAS 37 Provisions
Recognition
Recognise a provision when there is a present obligation from a past event, a probable outflow of resources, and a
reliable estimate can be made.
Measurement
Use the best estimate of expenditure required to settle the obligation, discounted where the time value of money is
material.
Contingencies
A contingent liability is generally disclosed unless the possibility of outflow is remote. A contingent asset is
disclosed when inflow is probable and recognised only when virtually certain.
6. IAS 38 Intangible assets
Recognition
An identifiable non-monetary asset without physical substance. Separately acquired assets are normally measured
initially at cost.
Research vs development
Research expenditure is expensed. Development expenditure is capitalised only when all required recognition
criteria are demonstrated.
Useful life
Finite-life assets are amortised. Indefinite-life assets are not amortised but are tested for impairment.
7. IFRS 15 Revenue
Five-step model
1 identify the contract; 2 identify performance obligations; 3 determine transaction price; 4 allocate transaction
price; 5 recognise revenue when/as performance obligations are satisfied.
Over time
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Revenue is recognised over time when the relevant criteria are met, for example where the customer
simultaneously receives and consumes benefits or the asset has no alternative use and the entity has an
enforceable right to payment for performance completed.
Variable consideration
Include variable consideration only to the extent that it is highly probable that a significant reversal will not occur
when the uncertainty is resolved.
8. IFRS 16 Leases
Lessee
At commencement, a lessee generally recognises a right-of-use asset and a lease liability for leases, subject to
exemptions such as short-term leases and low-value assets.
Lease liability
Initially measured at the present value of unpaid lease payments.
Right-of-use asset
Initially includes the lease liability, payments made at/before commencement less incentives, initial direct costs and
estimated restoration costs.
Subsequent
Depreciate the right-of-use asset and recognise interest on the lease liability; payments reduce the liability.
9. IFRS 9 Financial instruments
Classification
Financial assets are classified using the business model and contractual cash-flow characteristics. Common
categories include amortised cost, FVOCI and FVTPL.
Amortised cost
Generally applies where assets are held to collect contractual cash flows and those cash flows are solely
payments of principal and interest.
Impairment
The expected credit loss model recognises credit losses before an actual default occurs.
10. IAS 12 Deferred tax
Temporary differences
Deferred tax arises from temporary differences between the carrying amount of an asset or liability and its tax
base, subject to recognition exceptions.
Deferred tax liability
Generally recognised for taxable temporary differences, with specific exceptions.
Deferred tax asset
Recognised for deductible temporary differences and unused tax losses/credits when it is probable that taxable
profits will be available.
11. IAS 7 Cash flows
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Classification
Cash flows are classified as operating, investing or financing activities.
Operating
Cash flows from principal revenue-producing activities and other activities that are not investing or financing.
Investing
Acquisition/disposal of long-term assets and investments not treated as cash equivalents.
Financing
Changes in contributed equity and borrowings.
12. Consolidation & goodwill
Control
A parent consolidates an investee when it controls it. Control generally requires power over the investee, exposure
to variable returns, and ability to use power to affect those returns.
Goodwill
Goodwill is generally the excess of consideration transferred plus NCI and, for a step acquisition, previously held
interest, over the fair value of identifiable net assets acquired.
NCI
Non-controlling interests represent equity in a subsidiary not attributable to the parent. Measure NCI using the
method required/selected under the applicable standard for the transaction.
Intra-group items
Eliminate intra-group balances, transactions and unrealised profits so the group is presented as a single economic
entity.
13. Associates
Significant influence
An associate is an investee over which the investor has significant influence and that is not a subsidiary or joint
arrangement. 20% or more of voting power is presumed to indicate significant influence unless clearly
demonstrated otherwise.
Equity method
Initially recognise at cost; subsequently adjust for the investor's share of post-acquisition profit or loss and OCI,
and reduce for distributions received.
14. Analysis & ratios
Profitability
Gross profit margin = gross profit / revenue. Operating profit margin = operating profit / revenue. ROCE = operating
profit / capital employed.
Liquidity
Current ratio = current assets / current liabilities. Quick ratio = (current assets − inventory) / current liabilities.
Gearing
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A common measure is debt / (debt + equity), although definitions vary. State the definition used.
Investor ratios
EPS, P/E and dividend yield help assess shareholder returns and market valuation. Always interpret the direction
and context rather than relying on one ratio.
15. Exam technique
Calculations
Show workings clearly, label figures and keep adjustments traceable. For consolidation questions, separate
consideration, net assets, goodwill, NCI and group retained earnings.
Narrative
Answer the requirement directly. Explain the accounting treatment, identify the relevant issue/standard and
quantify the effect where possible.
Time management
Allocate time broadly in proportion to marks. If stuck, move on and return later; do not allow one calculation to
consume disproportionate time.
Final check
Check signs, dates, units, depreciation periods, intra-group eliminations, tax effects and whether the requirement
asks for group or parent-only figures.
ACCA FR Study Notes — Page 6
Quick Formula Sheet
Topic
Formula / reminder
Gross margin
Gross profit ÷ revenue × 100
Operating margin
Operating profit ÷ revenue × 100
ROCE
Operating profit ÷ capital employed × 100
Current ratio
Current assets ÷ current liabilities
Quick ratio
(Current assets − inventory) ÷ current liabilities
Inventory days
Average inventory ÷ cost of sales × 365
Receivable days
Average receivables ÷ credit sales × 365
Payable days
Average payables ÷ credit purchases/cost of sales × 365
EPS
Profit attributable to ordinary shareholders ÷ weighted average ordinary shares
Reference: ACCA Financial Reporting syllabus and study guide for September 2026–June 2027. The official ACCA syllabus is
available from ACCA Global.
ACCA FR Study Notes — Page 7