CIMA Financial Reporting - F1 Exam Questions [2026]

QUESTION NO: 1
In most developed countries employers deduct the tax from employees' pay each month and then pay the tax to the tax authorities on behalf of the employee on a monthly basis.
Which THREE of the following are advantages of this system to the employee?

A. The payment of tax is easier as the tax is deducted before the net salary is paid to the employee. B. There is less chance of interest and penalties being levied on the employee by the tax authorities. C. Most of the administration costs are borne by the employees. D. The tax is collected earlier than systems that assess earnings at the end of the year. E. The responsibility for the tax calculations rests with the employer and therefore there is less chance of mistakes being made.

Correct Answer: A,B,E

QUESTION NO: 2
If a parent entity is to be exempt from preparing consolidated financial statements it needs to satisfy certain conditions according to IFRS 10 Consolidated Financial Statements.
Which TWO of the following are conditions that need to be satisfied to be exempt?

A. The parent entity is itself a wholly owned subsidiary of another entity. B. The parent entity has no more than 10 subsidiaries or associated entities. C. The parent entity has subsidiaries, one or more of which publishes consolidated financial statements. D. The ultimate parent of the parent entity publishes consolidated financial statements which are publicly available. E. The parent 's investment in its subsidiaries are all below 100%.

Correct Answer: A,D

QUESTION NO: 3
In Country X, trading losses in any year can be carried back and set off against trading profits in the previous year, with any unrelieved losses carried forward to set against the first available trade profits in future years.
GH had the following taxable profits and losses in years 20X1 to 20X4:

What are the taxable profits for 20X4, assuming the most efficient use of the loss is made?

A. $65,000 B. $95,000 C. $70,000 D. $100,000

Correct Answer: B

QUESTION NO: 4
Mr AM is the owner of Waxco Ltd. Mr AM was born in India, but currently resides in the USA. He has gained dual Indian and American citizenship.
Mr AM first registered Waxco Ltd in the USA when he started the company ten years ago. However, because of lower costs, the company moved its central management station to Germany two years ago. Waxco Ltd has other smaller offices such as call centres across Asia, in locations such as Pakistan and Cambodia, however Waxco Ltd only currently sell goods in the USA.
Which of the countries mentioned are relevant for determining Waxco Ltd's competent jurisdiction?

A. Pakistan B. Germany C. India D. Cambodia E. The USA

Correct Answer: B,E

QUESTION NO: 5
ABC uses an aggressive approach to managing its working capital. XYZ uses a conservative approach to managing its working capital.
Which of the following is ABC more at risk of compared to XYZ?

A. High finance costs B. Running out of cash C. Receivables not paying on time D. Inventory obsolescence

Correct Answer: B

QUESTION NO: 6
The development of an international financial reporting standard generally goes through a number of stages.
Which of the following is NOT a stage of development?

A. Producing an exposure draft for public comment B. Developing and publishing a discussion paper C. Establishing an advisory committee D. Establishing an interpretations committee

Correct Answer: D

QUESTION NO: 7
On 31 July 20X8, CDE's directors decided to sell an asset with a carrying amount of $26,000. On that date it ceased to be used in readiness for its sale.
There is an active second-hand market for this type of asset and it has been advertised at its market value of $24,000 When a seller is found, the asset will need to be dismantled at a cost of $1,000 What is the amount to be recognised as an asset held for sale on 31 July 20X8?
Give your answer to the nearest $.

Correct Answer:

Pending

QUESTION NO: 8
DE purchased an asset on 1 January 20X1 for $60,000 with a useful economic life of six years and a residual value of $3,000.
DE uses straight line depreciation for this asset.
On 31 December 20X3 the asset has a value in use of $ $28,000 and a fair value of $26,000.
Which of the following values should be used for the asset in DE's statement of financial position as at 31 December 20X3?

A. $28,000 B. $31,500 C. $26,000 D. $30,000

Correct Answer: A

QUESTION NO: 9
Company R use a defined benefit plan pension scheme. Employee UW has been working for Company R for
25 years. The defined benefit plan is 1.5% of the employee's annual salary during their time at the company, for every year of employment.
Employee UW started on a £18,000 per annum salary. After 10 years of employment. Employee UW received a promotion and began earning £22,000. After another 3 years of employment. Employee UW got promoted to a wage of £35,000, and is still on this salary now. How much pension has Employee UW accumulated since working at Company R?

A. £6,750 B. £9,900 C. £18,000 D. £9,375

Correct Answer: B

QUESTION NO: 10
According to IAS 21 The Effects of Changes in Foreign Exchange Rates, an entity should determine its functional currency.
Which of the following is NOT a factor that should be considered by an entity when determining its functional currency?

A. The currency that mainly influences labour, material and other costs. B. The currency of the country whose competitive forces determine prices of goods and services. C. The currency used for published financial reports. D. The currency that mainly influences selling prices of the entity's goods and services.

Correct Answer: C

QUESTION NO: 11
If an entity makes a capital loss in a period, which of the following is the most likely way that will be allowed for relieving that capital loss?

A. Carry backwards and set against previous years trading profits. B. Carry forward and set against future trading profits C. Use group loss relief to transfer the capital loss to another group entity. D. Carry forward and set against future capital gains.

Correct Answer: D

QUESTION NO: 12
UK purchased an asset, with a useful economic life of 10 years, on 1 January 20X5 for $40,000. The asset was revalued on 31 December 20X6 to 544,000 and the directors believed its total useful economic life remained unchanged On 31 December 20X7 UK sells the asset for $50,000 How much will be recorded as a profit on disposal of the asset in UK's statement of profit or loss for the year ended 31 December 20X7?
Give your answer to the nearest $.

Correct Answer:

Pending

QUESTION NO: 13
EFG prepares financial statements to 31 December each year. EFG has the following receivable days based on the year end receivable balances:

Which of the following would be a reason for this decrease in receivable days?

A. EFG employed an inexperienced credit controller in November 20X2. B. EFG transferred collection of all receivables to a factoring agency during 20X2. C. EFG's revenue for 20X2 increased as a result of competitive pricing. D. EFG's largest customer negotiated an increase in credit terms during 20X2.

Correct Answer: B

QUESTION NO: 14
The Conceptual Framework for Financial Reporting issued by the International Accounting Standards Board (known as the IASB's conceptual framework) includes one underlying assumption about the preparation of financial statements and two fundamental qualitative characteristics for financial information.
Identify the underlying assumption and one of the fundamental characteristics by placing one of the options in each of the boxes below.

Correct Answer:

QUESTION NO: 15

Correct Answer: