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Under Ind AS 27 'Separate Financial Statements', an entity may account for its investments in subsidiaries, joint ventures, and associates in its separate financial statements using which permitted options?
A
B
C
D
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2026 Statistics
Key Facts: CA Final Financial Reporting Exam
100
Marks (3-Hour Paper)
ICAI CA Final New Scheme Syllabus
30%
Compulsory MCQ Weight
ICAI CA Final Examination Pattern
No
Negative Marking on MCQs
ICAI
2%
Minimum CSR Spend (Sec 135)
Companies Act, 2013
6
Capitals in <IR> Framework
Integrated Reporting Framework
40% / 50%
Pass: Paper / Aggregate
ICAI Examination Regulations
ICAI CA Final Paper 1, Financial Reporting, is a 100-mark, three-hour paper under the New Scheme 2023 with approximately 70% descriptive questions and a compulsory 30% MCQ section that carries no negative marking. The syllabus covers the Framework, application of Ind AS (presentation, assets, liabilities, revenue, and financial instruments), business combinations under Ind AS 103, consolidated and separate financial statements under Ind AS 110/111/112/27/28, analysis of financial statements, the Integrated Reporting <IR> Framework, and CSR reporting under Section 135 of the Companies Act, 2013. This free set provides 100 Ind AS practice MCQs with detailed explanations.
Sample CA Final Financial Reporting Practice Questions
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1Under the ICAI Framework for the Preparation and Presentation of Financial Statements in accordance with Ind AS, an item meeting the definition of an asset is recognised only when which two conditions are satisfied?
A.It is denominated in the entity's functional currency and is current
B.It is legally owned and physically held by the entity
C.It is probable that future economic benefits will flow to the entity and the cost or value can be measured reliably
D.It has been approved by the board and disclosed in the notes
Explanation: Recognition under the Framework requires that future economic benefits associated with the item are probable and that the item has a cost or value measurable with reliability. Legal ownership is not essential because control, not legal title, drives recognition.
2Ind AS 1 'Presentation of Financial Statements' requires an entity that departs from a requirement of an Ind AS in the extremely rare circumstance that compliance would be misleading to do what?
A.Disclose the departure, the standard departed from, the reason, and the financial effect of the departure for each item
B.Obtain prior approval from the Reserve Bank of India
C.Present the financial statements on a cash basis instead
D.Restate all prior periods presented without any disclosure
Explanation: Ind AS 1's true and fair override permits departure only in extremely rare circumstances and mandates extensive disclosure: the title of the standard departed from, the nature and reason for the departure, and the financial effect on each line item for each period presented. This preserves transparency.
3Under Ind AS 7 'Statement of Cash Flows', how should an entity classify interest paid and dividends paid, given the option permitted by the standard?
A.Interest paid may be operating or financing, and dividends paid may be financing or operating, applied consistently
B.Both must be classified as investing activities
C.Both are excluded from the statement of cash flows entirely
D.Interest paid and dividends paid must always be operating activities
Explanation: Ind AS 7 allows interest paid to be classified as either operating or financing, and dividends paid as either financing or operating, provided the chosen classification is applied consistently from period to period. The standard offers this flexibility because views differ on the nature of these flows.
4Ind AS 108 'Operating Segments' requires the determination of reportable segments primarily based on which approach?
A.The geographical location of the registered office
B.A fixed list of industry classifications prescribed by ICAI
C.The legal entity structure of the group
D.The management approach, using internal reports reviewed by the chief operating decision maker
Explanation: Ind AS 108 adopts the management approach: operating segments are identified on the basis of internal reports that are regularly reviewed by the entity's chief operating decision maker (CODM) to allocate resources and assess performance. This aligns external reporting with how management actually runs the business.
5Under Ind AS 34 'Interim Financial Reporting', how should income tax expense in an interim period generally be recognised?
A.Using an estimated average annual effective income tax rate applied to interim pre-tax income
B.Only in the final quarter of the financial year
C.At a flat 25% regardless of the entity's actual tax position
D.At the statutory rate applied only to the quarter's profit in isolation
Explanation: Ind AS 34 requires interim period income tax expense to be accrued using the tax rate that would be applicable to expected total annual earnings, i.e. the estimated weighted average annual effective income tax rate applied to the interim period's pre-tax income. This avoids distortion from items concentrated in particular quarters.
6An entity changes its method of inventory valuation from FIFO to weighted average. Under Ind AS 8, how is this normally accounted for?
A.Retrospectively as a change in accounting policy, restating comparatives
B.By recognising the effect directly in other comprehensive income
C.Prospectively from the date of change
D.As a change in accounting estimate adjusted in the current period only
Explanation: A change in the cost formula for inventory is a change in accounting policy under Ind AS 8 and is applied retrospectively, with comparative information restated and the opening balance of retained earnings adjusted, unless impracticable. This ensures comparability across periods.
7Under Ind AS 10 'Events after the Reporting Period', the declaration of dividends to equity holders after the reporting period but before the financial statements are approved is treated as which type of event?
A.An adjusting event requiring a liability to be recognised at the reporting date
B.A non-adjusting event, disclosed but not recognised as a liability at the reporting date
C.A prior period error
D.A change in accounting estimate
Explanation: Dividends declared after the reporting period do not meet the definition of a present obligation at the reporting date, so under Ind AS 10 they are non-adjusting events. No liability is recognised at year end; the dividend is disclosed in the notes. This contrasts with the earlier AS approach.
8Ind AS 24 'Related Party Disclosures' requires disclosure of key management personnel (KMP) compensation broken down into which categories?
A.Short-term employee benefits, post-employment benefits, other long-term benefits, termination benefits, and share-based payments
B.Only benefits exceeding the materiality threshold set by the auditor
C.Director sitting fees alone
D.Only the total cash salary paid during the year
Explanation: Ind AS 24 requires KMP compensation to be disclosed in total and analysed across short-term employee benefits, post-employment benefits, other long-term benefits, termination benefits, and share-based payment. This granular disclosure supports transparency about amounts paid to those who direct the entity.
9Under Ind AS 33 'Earnings per Share', which instruments are considered when computing diluted EPS?
A.Potential ordinary shares that are dilutive, such as convertible bonds and options that would decrease EPS
B.All potential ordinary shares regardless of whether they are dilutive or anti-dilutive
C.Only redeemable preference shares
D.Only ordinary shares actually issued during the year
Explanation: Diluted EPS adjusts basic EPS for the effect of all dilutive potential ordinary shares, including convertible instruments, options, and warrants, that would reduce earnings per share. Anti-dilutive instruments, which would increase EPS, are ignored to avoid overstating dilution.
10A company has 10,00,000 equity shares outstanding and net profit attributable to equity holders of Rs 50,00,000. It also has 1,00,000 outstanding share options with an exercise price of Rs 20 when the average market price is Rs 25. What is the number of bonus (free) shares deemed issued for diluted EPS under Ind AS 33?
A.20,000 shares
B.80,000 shares
C.25,000 shares
D.1,00,000 shares
Explanation: Under the treasury stock method, options give rise to 1,00,000 ordinary shares of which 1,00,000 x 20 / 25 = 80,000 are assumed bought back at average market price. The dilutive (free) element is 1,00,000 - 80,000 = 20,000 shares. These free shares increase the denominator for diluted EPS.
About the CA Final Financial Reporting Practice Questions
Verified exam format metadata for ICAI CA Final Paper 1: Financial Reporting is pending. The practice questions above remain available while official exam length, timing, passing score, fee, and administrator details are reviewed.