Free Practice Questions for CA Sri Lanka Strategic Level Exam

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Sample CA Sri Lanka Strategic Level Exam Practice Questions

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1Parent PLC held a 25% equity interest in Target Ltd accounted for as an associate under LKAS 28, with a carrying amount of LKR 30,000,000 on 30 June 2025. On 1 July 2025, Parent PLC acquired an additional 55% voting interest in Target Ltd for cash of LKR 80,000,000, gaining control. On that date, the fair value of Parent's original 25% interest was independently appraised at LKR 40,000,000, and the fair value of Target's identifiable net assets was LKR 130,000,000. Under SLFRS 3 (Business Combinations), how should Parent PLC account for its existing 25% interest in Target Ltd upon acquiring control?

A.Remeasure the existing 25% interest to its acquisition-date fair value of LKR 40,000,000, recognizing a gain of LKR 10,000,000 in profit or loss

B.Retain the existing 25% interest at its historical carrying amount of LKR 30,000,000 and calculate goodwill using total cash paid of LKR 80,000,000 only

C.Remeasure the existing 25% interest to LKR 40,000,000 and credit the LKR 10,000,000 surplus directly to a revaluation reserve in equity

D.Offset the LKR 10,000,000 fair value uplift directly against the goodwill arising on acquisition

Explanation: Under SLFRS 3.42, in a business combination achieved in stages (step acquisition), the acquirer shall remeasure its previously held equity interest in the acquiree at its acquisition-date fair value and recognize the resulting gain or loss in profit or loss (or OCI if previously classified as FVOCI). Here, the carrying value was LKR 30m and fair value is LKR 40m, so a gain of LKR 10,000,000 is recognized in profit or loss.

2A parent company disposes of a 60% equity interest in its 80% owned subsidiary, leaving the parent with a remaining 20% interest over which it retains significant influence as an associate. Under SLFRS 10 (Consolidated Financial Statements), how should the parent account for the loss of control in its consolidated financial statements?

A.Retain all assets and liabilities of the subsidiary at their carrying amounts and record the disposal proceeds as a direct adjustment to retained earnings

B.Derecognize the assets (including goodwill) and liabilities of the subsidiary, derecognize the carrying amount of non-controlling interests, recognize the fair value of consideration received, recognize the retained 20% interest at fair value at the date control is lost, and recognize the resulting net gain or loss in profit or loss

C.Continue consolidating the subsidiary on a proportional basis reflecting the retained 20% equity interest

D.Record the retained 20% investment at its original historical cost when the subsidiary was initially acquired ten years ago

Explanation: Under SLFRS 10.25 and B98, when a parent loses control of a subsidiary, it must: (1) derecognize the assets and liabilities of the former subsidiary and the carrying amount of any NCI; (2) recognize the fair value of consideration received; (3) recognize any retained investment at fair value at the date control is lost; and (4) recognize the resulting difference as a gain or loss in profit or loss attributable to the parent.

3Under LKAS 21 (The Effects of Changes in Foreign Exchange Rates), which of the following represents a primary factor that an entity must consider when determining its functional currency?

A.The currency in which the parent entity prepares its annual consolidated reports

B.The currency in which tax liabilities are settled with the local department of revenue

C.The currency that mainly influences sales prices for goods and services, and the currency of the country whose competitive forces and regulations mainly determine sales prices

D.The currency of the country where the corporate legal headquarters is formally registered

Explanation: Under LKAS 21.9, the primary factors in determining functional currency are: (a) the currency that mainly influences sales prices for goods and services (often the currency in which prices are denominated and settled), and of the country whose competitive forces and regulations mainly determine sales prices; and (b) the currency that mainly influences labor, material, and other costs of providing goods or services.

4When translating the financial statements of a foreign operation whose functional currency is not the currency of a hyperinflationary economy into the presentation currency of a Sri Lankan parent company under LKAS 21, how must the resulting exchange differences be recognized?

A.Recognized in profit or loss as an operating foreign exchange gain or loss in the current year

B.Capitalized into the carrying amount of consolidated property, plant, and equipment

C.Recorded as a deferred liability in the statement of financial position and amortized over 20 years

D.Recognized in other comprehensive income (OCI) and accumulated in a separate component of equity (foreign currency translation reserve), until disposal of the foreign operation

Explanation: Under LKAS 21.39, when translating a foreign operation into a presentation currency, assets and liabilities are translated at closing exchange rates, and income/expenses are translated at transaction rates (or appropriate average rates). The resulting translation differences are recognized in other comprehensive income (OCI) and accumulated in a separate reserve in equity. Upon disposal of the foreign operation, they are reclassified to profit or loss.

5A corporate entity in Sri Lanka issues 100,000 3-year convertible bonds with a par value of LKR 1,000 each (total proceeds LKR 100,000,000). The bonds carry an annual coupon of 6%. At maturity, each bond can be converted into 50 ordinary shares or redeemed for cash at par. The market interest rate for similar non-convertible debt with no share conversion rights is 10% per annum. Under LKAS 32 (Financial Instruments: Presentation), how should this compound financial instrument be initially recognized?

A.Split accounting: Measure the liability component first at the present value of future cash flows discounted at 10%, and assign the residual proceeds to the equity conversion option

B.Classify the entire LKR 100,000,000 as equity because bondholders have the option to convert into shares

C.Classify the entire LKR 100,000,000 as a non-current financial liability, recording conversion rights only upon exercise

D.Recognize the liability at LKR 100,000,000 and record an intangible asset of LKR 10,000,000 for the conversion feature

Explanation: Under LKAS 32.28-31, compound financial instruments containing both liability and equity elements must be evaluated using split accounting. The issuer evaluates the liability component first by determining the present value of contractual interest and principal payments discounted at the market rate for comparable non-convertible debt (10%). The equity component (the conversion option) is then measured as the residual difference between total proceeds and the liability fair value.

6Under SLFRS 9 (Financial Instruments), an entity designates a forward exchange contract as a cash flow hedge of a highly probable forecast foreign currency export sale expected to occur in six months. During the hedging period, how should the effective portion of gains and losses on the forward contract be recognized?

A.Recognized immediately in profit or loss as financing income or expense

B.Recognized in other comprehensive income (OCI) and accumulated in the cash flow hedge reserve within equity, to be reclassified to profit or loss when the hedged forecast sale occurs

C.Capitalized as an addition to finished goods inventory on the statement of financial position

D.Deferred indefinitely in a liability suspense account without reclassification

Explanation: Under SLFRS 9.6.5.11, as long as a cash flow hedge meets the qualifying criteria, the effective portion of the gain or loss on the hedging instrument is recognized in other comprehensive income (OCI) and accumulated in the cash flow hedge reserve. When the hedged forecast transaction subsequently affects profit or loss (e.g., when the export sale is recognized), the accumulated reserve is reclassified to profit or loss.

7A corporation enters into an interest rate swap to convert a fixed-rate borrowing into a floating-rate obligation, designating the arrangement as a fair value hedge under SLFRS 9. How are gains and losses on the swap and the hedged borrowing accounted for in the financial statements?

A.Both gains and losses are recognized directly in retained earnings without affecting profit or loss

B.The gain or loss on the swap is recognized in OCI, while the borrowing remains at historical amortized cost

C.The gain or loss on the hedging instrument (swap) and the offsetting gain or loss on the hedged borrowing attributable to the hedged interest rate risk are both recognized in profit or loss

D.The gain or loss on the borrowing is capitalized into borrowing costs under LKAS 23, and the swap is ignored

Explanation: Under SLFRS 9.6.5.8, in a fair value hedge: (1) the gain or loss on the hedging instrument is recognized in profit or loss; and (2) the hedging gain or loss on the hedged item adjusts the carrying amount of the hedged item and is recognized in profit or loss. If the hedge is perfectly effective, the two offsetting amounts recognized in profit or loss exactly match, resulting in zero net P&L impact.

8Under LKAS 19 (Employee Benefits) and IFRIC 14, when a defined benefit pension plan shows a net surplus (fair value of plan assets exceeds the present value of the defined benefit obligation), what is the maximum amount that the entity can recognize as a net defined benefit asset on its statement of financial position?

A.The total unadjusted surplus calculated by the actuary with no restrictions

B.Zero, because pension surpluses can never be recognized as assets under any circumstance

C.The total fair value of plan assets without deducting the defined benefit obligation

D.The lower of the plan surplus and the asset ceiling (the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions)

Explanation: Under LKAS 19.64 and IFRIC 14, an entity shall measure the net defined benefit asset at the lower of: (a) the surplus in the defined benefit plan; and (b) the asset ceiling. The asset ceiling is defined as the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan. Any surplus exceeding this ceiling cannot be recognized as an asset.

9Under SLFRS 2 (Share-based Payment), an entity grants 1,000 share options to each of its 10 divisional directors. The options vest after 3 years provided the directors remain employed and the company's average annual return on capital employed (ROCE) exceeds 18% over the period. How should this non-market performance condition be treated in measuring and recognizing the share-based payment expense?

A.The non-market condition is not factored into the grant-date fair value of the options; instead, the entity estimates the number of options expected to vest and updates this estimate at each reporting date until vesting

B.The non-market condition is factored into the grant-date fair value using a Black-Scholes option pricing model and never adjusted thereafter

C.The expense is recognized only on the vesting date if and when the 18% ROCE target is successfully met

D.The grant is classified as a cash-settled liability and remeasured at every reporting date

Explanation: Under SLFRS 2.19-21, vesting conditions other than market conditions (such as service conditions and internal performance targets like ROCE or earnings growth) shall not be taken into account when estimating the grant-date fair value of the options. Instead, they are accounted for by adjusting the number of equity instruments included in the measurement of the transaction, revising the estimate at each reporting date until vesting.

10Under SLFRS 2 (Share-based Payment), how must an entity account for a cash-settled share-based payment transaction, such as Share Appreciation Rights (SARs) that entitle employees to future cash payments based on the increase in the entity's share price?

A.Recognize the award in equity at grant-date fair value and make no subsequent adjustments

B.Recognize a liability over the vesting period, remeasuring the liability at fair value at each reporting date and at settlement, with fair value changes recognized in profit or loss

C.Expense the full estimated cash payout immediately in profit or loss on the grant date

D.Disclose the award exclusively in the notes without recognizing any liability until cash is actually paid

Explanation: Under SLFRS 2.30-33, for cash-settled share-based payment transactions, the entity shall measure the goods or services acquired and the liability incurred at the fair value of the liability. Until the liability is settled, the entity shall remeasure the fair value of the liability at each reporting date and at the date of settlement, with any changes in fair value recognized in profit or loss for the period.

About the CA Sri Lanka Strategic Level Exam Exam

The Strategic Level is the pinnacle examination stage of the CA Sri Lanka qualification under Curriculum 2025-30, leading upon completion of all modules, S-CAP, and senior practical training to membership as an Associate Chartered Accountant (ACA). It evaluates high-level strategic leadership, complex group structures, business valuation, corporate mergers and acquisitions, treasury risk hedging, enterprise risk governance, advanced audit and professional practice, and strategic cross-border tax planning.

Exam sponsor: Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka). The requirements and fees below concern the certification or admission exam, separate from our free practice resources.

Assessment

Four 3-hour paper-based examinations: SL-25-1 Advanced Corporate Reporting, SL-25-2 Strategic Finance and Management Accounting, an elective in the Risk, Controls & Assurance pillar (SL-25-3.1 Advanced Audit and Professional Practice OR SL-25-3.2 Advanced Risk Management and Corporate Governance; candidates sit one), and SL-25-4 Strategic Tax Planning. Each paper carries 100 marks with a 50% pass mark. Section A is one compulsory mini case question of 50 marks; Section B offers three scenario-based questions of 25 marks each, of which the candidate answers two. Strategic Level examinations are held in June and December in English medium only. Candidates also complete the Strategic Capstone (S-CAP), which combines a pre-seen case, a physical verbal pitch delivered before a panel appointed by CA Sri Lanka, and an unseen written assessment. CA Sri Lanka notes that SL-25-3.1 is the route for candidates seeking eligibility for the Certificate to Practice, while SL-25-3.2 suits those aiming at commercial and industry roles.

Time Limit

3 hours per module (12 hours total across 4 modules).

Passing Score

50% for each module and 50% for the Strategic Capstone (S-CAP).

Exam / Certification Fees

LKR 8,200 per examination (physical) / LKR 17,000 (virtual, overseas candidates); S-CAP is LKR 15,400 (physical) / LKR 25,500 (virtual). Payment codes EX03 and EX05.

Exam sponsor website

Fees, eligibility, and exam policies can change. Confirm them with the exam sponsor before applying or paying.

Official sources

Our practice resources: topics covered

We aim to reflect publicly available exam outlines and topic information in our study resources. Coverage, format, and difficulty may differ from the actual exam, and we cannot guarantee that every detail is accurate or current. Confirm exam requirements, fees, and policies with the official exam sponsor.

25%

SL-25-1 Advanced Corporate Reporting

Complex group reporting, foreign entity translation (LKAS 21), financial instruments hedge accounting (SLFRS 9), fair value measurement (SLFRS 13), employee benefits (LKAS 19), share-based payments (SLFRS 2), and comprehensive sustainability disclosures (SLFRS S1 & S2).

25%

SL-25-2 Strategic Finance and Management Accounting

Strategic corporate financial leadership, business valuation models (DCF, asset-based, earnings multiples), mergers, acquisitions, and corporate restructuring, treasury risk management, financial derivatives (options, futures, swaps), and strategic value creation.

25%

SL-25-3 Advanced Audit / Risk & Governance (Electives)

Covers both elective pathways: SL-25-3.1 Advanced Audit and Professional Practice (complex group audit strategy, SLAuS 600, transnational audits, quality management) and SL-25-3.2 Advanced Risk Management & Corporate Governance (ERM frameworks, board leadership, cyber resilience, ethical culture).

25%

SL-25-4 Strategic Tax Planning

Advanced corporate tax planning, domestic and international tax structuring, Double Tax Avoidance Agreements (DTAAs), Sri Lankan transfer pricing regulations, indirect tax optimization, and tax controversy and dispute management.

Preparing for the CA Sri Lanka Strategic Level Exam Exam

What You Need to Know

Passing score: 50% for each module and 50% for the Strategic Capstone (S-CAP).
Assessment: Four 3-hour paper-based examinations: SL-25-1 Advanced Corporate Reporting, SL-25-2 Strategic Finance and Management Accounting, an elective in the Risk, Controls & Assurance pillar (SL-25-3.1 Advanced Audit and Professional Practice OR SL-25-3.2 Advanced Risk Management and Corporate Governance; candidates sit one), and SL-25-4 Strategic Tax Planning. Each paper carries 100 marks with a 50% pass mark. Section A is one compulsory mini case question of 50 marks; Section B offers three scenario-based questions of 25 marks each, of which the candidate answers two. Strategic Level examinations are held in June and December in English medium only. Candidates also complete the Strategic Capstone (S-CAP), which combines a pre-seen case, a physical verbal pitch delivered before a panel appointed by CA Sri Lanka, and an unseen written assessment. CA Sri Lanka notes that SL-25-3.1 is the route for candidates seeking eligibility for the Certificate to Practice, while SL-25-3.2 suits those aiming at commercial and industry roles.
Time limit: 3 hours per module (12 hours total across 4 modules).
Exam / certification fees: LKR 8,200 per examination (physical) / LKR 17,000 (virtual, overseas candidates); S-CAP is LKR 15,400 (physical) / LKR 25,500 (virtual). Payment codes EX03 and EX05. Official sources

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CA Sri Lanka Strategic Level Exam: Suggested Study Strategy

1Master business valuation techniques under SL-25-2: practice multi-stage Discounted Cash Flow (DCF), Dividend Discount Model (DDM), Economic Value Added (EVA), and asset-based approaches with realistic debt-equity weighting.

2Thoroughly analyze complex group accounting rules in SL-25-1: review foreign operation functional currency translation (LKAS 21), hedge accounting criteria (SLFRS 9), and sustainability reporting metrics (SLFRS S1 and S2).

3Develop familiarity with Sri Lankan transfer pricing rules and double tax treaties in SL-25-4: understand the arm's length principle, transfer pricing documentation thresholds, and foreign tax credit computations under the Inland Revenue Act.

Frequently Asked Questions

What credential and title is conferred upon passing the CA Sri Lanka Strategic Level?

Passing all Strategic Level modules, successfully completing the Strategic Capstone (S-CAP) with its viva/verbal pitch, and meeting the 3-year prescribed practical training requirement entitles candidates to full membership in CA Sri Lanka as an Associate Chartered Accountant (ACA).

How does the elective module work between SL-25-3.1 and SL-25-3.2?

Under Curriculum 2025-30 candidates elect one of two modules in the Risk, Controls & Assurance pillar: SL-25-3.1 Advanced Audit and Professional Practice, which CA Sri Lanka identifies as the route for those seeking eligibility for the Certificate to Practice, or SL-25-3.2 Advanced Risk Management and Corporate Governance, aimed at commercial and industry careers. Because a candidate sits only one of the two, this independent practice bank covers both tracks.

What is the examination format and delivery medium for the Strategic Level?

Official Strategic Level examinations are conducted in English medium only, using a 3-hour written paper per module comprising Section A (one compulsory mini case of 50 marks) and Section B (two 25-mark scenario questions chosen from three). The pass mark is 50%. The Strategic Capstone (S-CAP) additionally requires a physical verbal pitch delivered directly before an official CA Sri Lanka panel.

Is this practice question bank an official CA Sri Lanka examination simulation?

No. While the real CA Sri Lanka Strategic Level consists of 3-hour written case study examinations in English with a viva pitch capstone, this question bank is an independent English-language MCQ study adaptation developed by OpenExamPrep to test, practice, and solidify strategic judgment and technical problem-solving.