Diploma in

International
Financial Reporting
(Dip IFR)
December 2022
Examiner’s report
The examining team share observations from the
marking process to highlight strengths and
weaknesses in candidates’ performance, and to offer
constructive advice for those sitting the exam in the
future.

Contents
General Comments ............................................................. 2
Specific Comments.............................................................. 5
Question One ................................................................... 5
Question Two ................................................................... 7
Question Three .............................................................. 10
Question Four ................................................................ 12

Examiner’s report – DipIFR December 2022 1

General Comments

The examination consisted of four compulsory questions. All questions carried 25

marks. This report should be used in conjunction with the published examination
which can be found on the DipIFR past exams library.

This sitting was the fifth time the DipIFR examination had been sat by candidates as
a Computer Based Exam (CBE). The number of candidates presenting scripts was
higher than in June 2022. It is pleasing to note this trend, which is probably caused
by the diminishing impact of the Covid 19 pandemic. This means that the comments
on this paper are likely to be more useful to future candidates, given that they relate
to a larger candidate cohort.

In previous examiners’ reports I have noted that the performance on question one is
always stronger than in the other questions. This is certainly apparent this time,
where the percentage of candidates achieving a score of 12.5 or more out of 25 on
question one (the pass threshold) was more than double the percentage achieving
such a score on questions two, three and four. Question one will always be a
question involving consolidation, with some additional adjustments to the draft
financial statements of the parent prior to consolidation. I reiterate comments made
in previous reports that in order to achieve success in this paper, candidates need to
have more than simply a proficient consolidation technique. I repeat this observation
since it continues to have relevance.

It is clearly appropriate to use the spreadsheet function to perform numerical

workings for question one. That said, care should be taken to ensure that a full trail is
available for the marker to follow. If an incorrect number is included in a cell with no
obvious reference to a working, then it can be very difficult for the marker to reward
those parts of the calculation that were in fact done correctly. Candidates are
encouraged to fully cross reference all workings to appropriate spreadsheet cells,
where appropriate. Candidates are encouraged to ensure they are familiar with the
CBE functionality and layout and should use the CBE specimen exam and guides
available on the DipIFR study resources website.

When a spreadsheet is provided in addition to the word processing response area

for questions two and three, this is to assist candidates with the computational
components of these questions. The same principles of using the spreadsheet
functionality and showing adequate workings therefore apply to questions two and
three. These supporting calculations should then be cross referenced to their
answers in the word processing response area. The spreadsheet should not be used
for the narrative component of these questions. However, a candidate can of course
provide detailed workings and calculations in the word processing area if preferred.

Examiner’s report – DipIFR December 2022 2

Questions two, three and four require a mixture of computations and explanations
(question four is almost entirely explanations). I have stated in previous reports that
in many cases the explanations provided lack depth. This is a key cause of relatively
poor marks in these questions. I would offer the following general advice for all parts
of questions two, three and four:

i. Read the relevant scenario and requirements thoroughly. It is clear that often
this is not done to sufficient depth which leads to ‘general’ answers that lack
application to the scenario.

ii. Identify the relevant International Financial Reporting Standard or standards

(IFRS Accounting Standards). Candidates who state the incorrect IFRS
Accounting Standard number will not be penalised. For example, one of the
relevant IFRS Accounting Standards for question four of this paper was IAS
10 – Events after the Reporting Period (see later detailed commentary on this
question for more information). Candidates who realised that there was a
standard dealing with events after the reporting period received credit even if
they did not correctly name the relevant IFRS Accounting Standard as IAS 10.

iii. Set out the relevant requirements of each IFRS Accounting Standard you
identify. Candidates who set out parts of a relevant IFRS accounting Standard
that are not directly applicable to the scenario (for example, in question two of
this paper, listing out the five-step approach described for the recognition of
revenue set out in IFRS 15 – Revenue from Contracts with Customers –
without any application to the scenario) will not receive credit for such
statements, even though they are accurate.

iv. Where the question requires extracts from the financial statements compute
the relevant numbers and state where in the financial statements they should
be shown. Candidates often lose marks here for not comprehensively
following this approach. For example, question two of this paper required
candidates to identify the amount of revenue to recognise on a contract with
two performance obligations (see later detailed commentary on question two).
The terms of the contract were such that some of the income already received
from the customer could not currently be recognised as revenue and had to
be shown as deferred income in the statement of financial position. This
deferred income should be shown as a liability and split into its current and
non-current portions. A number of candidates correctly identified the overall
deferred income but did not develop their answer by describing exactly where
in the statement of financial position the deferred income should be shown.
This caused them to miss out on what were probably fairly achievable marks.

v. Question 2 introduced an ethics component in the December 2021

examination and this will always be the case with a maximum of 5 marks
allocated to this part of the question. Many candidates are not providing an

Examiner’s report – DipIFR December 2022 3

 answer to this very achievable aspect of this question. Candidates should look
at the published questions and answers and refer to the technical article on
the website. Failing to address this component is a missed opportunity to
score valuable marks.

Time pressure continues to apparently be a particular issue for a number of

candidates. Often the answers to question four for this paper were extremely brief. It
is difficult to be certain from marking candidates’ answers but in many cases,
answers were so brief that it appeared that insufficient time remained with which to
answer question four. There were also a significant number of non-attempts on
question four. This probably indicated that excessive time was spent on previous
questions. Time management is an essential part of a successful examination
strategy for any examination, including the Dip IFR INT examination.

Examiner’s report – DipIFR December 2022 4

Specific Comments

Question One

The scenario for the question was based around a parent entity, Alpha, with a
subsidiary, Beta. The question required candidates to prepare the consolidated
statement of financial position of Alpha at 30 September 20X2. Aside from ‘routine’
consolidation issues the question required candidates to deal with the following
issues:

• The treatment of an associate (Drax) in the consolidated financial statements

of Alpha.

• Impairment of goodwill on acquisition of Beta.

• The recognition of an obligation to restore a mineral extraction site to its

original condition at the end of the extraction process

On the whole, this question was answered reasonably satisfactorily. Candidates

know that question one will always be a consolidation question and so they
understandably study the topic thoroughly. The following aspects of the question
were generally performed satisfactorily:

• Application of the general principle of aggregation.

• Computation of the impact of fair value adjustments on both goodwill and

consolidated retained earnings

• Overall computation of the goodwill on acquisition.

Relatively common errors that were apparent are summarised below:

Examiner’s report – DipIFR December 2022 5

A significant number of candidates failed to process the adjustments required to
recognise the restoration costs required at the end of the mineral extraction process
(Exhibit 4 to the question). This was surprising as the topic has appeared before in a
very similar light. Candidates should have recognised a provision and an associated
asset initially measured at the present value of the future expected restoration costs.
There was a finance cost associated with the provision and the associated asset
should have been depreciated (or amortised) over the period from the initial
recognition of the provision and the date the restoration costs were expected to be
incurred. The suggested answer shows the ‘restoration asset’ as intangible. However
where candidates included the correct figure as part of property, plant and
equipment then full credit was given.

Some weaker candidates were unable to correctly compute the impairment of

goodwill on acquisition of Beta. Since the non-controlling interest in Beta was initially
measured using the ‘fair value method’ there was no need to gross up the goodwill
figure prior to performing the impairment review. Despite this, some candidates did
just that. Equally, having computed the necessary impairment amount, some omitted
to appropriately allocate this amount between consolidated retained earnings and
the non-controlling interest. It appeared that some weaker candidates may have
‘rote-learned’ the method of computing goodwill impairment and got confused when
attempting to apply it to the scenario.

It was surprising to note that computations of the unrealised profit on intra-group

trading between Alpha and Beta were generally rather disappointing. Errors included
computing an incorrect adjustment factor (20/120 in this case), applying the
adjustment factor to all intra-group sales in the period, and getting the adjustment to
inventories and retained earnings the wrong way round.

In spite of the above issues, sound basic consolidation techniques meant that these
issues did not have an overall adverse effect on candidate performance, as the
overall pass rate was good.

I have stated earlier in this report it is most important to give clear workings for
question one in support of figures in the financial statements. This is good exam
technique as partial marks can be awarded even when the final figure may be
incorrect if understanding and application of knowledge is demonstrated. If figures
are computed incorrectly and no workings are provided it is very difficult for the
marker to award partial credit for parts of the calculation that were done incorrectly.
Candidates should practice these types of questions using a spreadsheet, and
consider how best they can layout clear workings and make efficient use of the
spreadsheet functionality. Candidates should look at the CBE guides for DipIFR that
are available on the ACCA website so they are prepared adequately for the CBE
environment.

Examiner’s report – DipIFR December 2022 6

Question Two

This question placed the candidate as a trainee accountant who was presented with
two relatively complex financial reporting issues:
• The sale of goods and the provision of an after-sales repair service.

• The potential impairment of an investment property.

The trainee accountant was being told by the Finance Director to recognise the
transactions in such a way as to maximise reported profits and Earnings per Share
(EPS). This would have benefited the trainee, who owned a number of equity shares
in Gamma. Candidates were required to:
• Identify the appropriate financial reporting treatments of two issues listed
above.

• Compute the EPS of Gamma for the period.

• Explain the ethical issues confronting the trainee as a result of the scenario.

Answers to this question were rather disappointing overall. The following comments
are offered to assist future candidates for this paper:

Generally
• There was insufficient explanation of the accounting required (clearly asked
for in the requirements). This meant that marks were lost by many
candidates

Sale of goods with after-sales repair service

• There was good basic knowledge of the IFRS 15 requirements to recognise
two revenue streams from two performance obligations and compute
appropriately.

Examiner’s report – DipIFR December 2022 7

 • Many candidates were unaware of how to recognise deferred income (the
contract liability) going forward and split into current versus non-current
elements.

• There was lack of discussion about the treatment of current and future costs
of fulfilling the obligation to repair the machine

• Poorer candidates listed out the five-step revenue recognition model from
IFRS 15 without any application. This gained very few marks on its own.

Impairment of an investment property

• Where candidates realised that impairment was the issue many gained very
good marks here. However, a significant minority of candidates made
irrelevant comments about leasing (IFRS 16) and/or ‘held for sale’ assets
(IFRS 5). These comments gained very a few marks.

• A significant minority of candidates erroneously stated that ‘recoverable

amount’ was the lower of ‘value-in-use’ and ‘fair value less costs of
disposal’. The reverse is of course the case

• A common area where knowledge was lacking was that IAS 36 Impairment
requires that recoverable amount be computed for an asset in its current
condition. The fact that the recoverable amount of the property would
potentially be higher if a restructuring that may or may not be carried out in
the near future were to take place does not mean that (in this case) the
recoverable amount of the property could be taken to be $1.3 million.
Erroneously stating this cost marks for a number of candidates.

Computation of EPS
• Many candidates’ computations were of an acceptable standard. ‘Own figure
marks’ were of course awarded here.

• A significant minority of candidates wasted time by providing explanations of

the EPS calculations. The question made it very clear that explanations were
not required in this part so no marks were gained here.

Discussion of ethical issues

• Where candidates attempted to relate the scenarios in the question to the
ethical guidance then marks were generally satisfactory.

• A minority of candidates simply wrote out the ethical guidance without any
attempt to apply it to the scenario. This gained very few marks.

• A minority of candidates missed out part (c) altogether, missing out on

potentially achievable marks.

Examiner’s report – DipIFR December 2022 8

Tutors and candidates should be aware that knowledge of the Code of Ethics and its
application to a specific scenario will always feature in question two in future
examinations. There is a technical article available on the website and the CBE
specimen exam has been adapted to reflect this new component.

Examiner’s report – DipIFR December 2022 9

Question Three

Candidates were required to explain and show the financial reporting treatment of
three separate transactions in the financial statements of Delta:
• The purchase of the brand name and inventory of an insolvent retailer,
together with the subsequent sale of the inventory that had been purchased.

• The provision of interest-free loans to key employees.

• A project seeking to identify ways of improving Delta’s manufacturing

process.

Answers to this question were of a variable quality. The following comments are
offered to assist future candidates for this paper:

Overall
• Generally speaking, based on responses to this question, candidates
seemed to be getting the message that explanations are required as well as
calculations. However, many weaker candidates simply provided a list of
journals in some parts. On their own these will score few marks.

Purchase of brand name and inventory

• There were good descriptions of the recognition criteria for intangible assets.
Some candidates discussed the ‘need’ to write off the brand over a 5-year
period. There was no evidence to support this write off period in the
question. Most candidates discussed the need for an annual impairment
review but few candidates actually stated that, based on the facts in the
question, there is no impairment necessary in the current period.

• Overall, the treatment on the inventory was discussed well. Weaker

candidates did not seem to appreciate that the sale of the inventory after the

Examiner’s report – DipIFR December 2022 10

 year-end was an adjusting event after the reporting date that would have an
impact on the net realisable value of the inventory. Such candidates often
wasted time discussing the eventual sale and loss on disposal in the
following period without providing any context for the current period.

Provision of interest-free loans to key employees

• Most candidates were able to appreciate that the interest-free loan was a
financial asset which should be measured at the present value of the future
repayment due. Therefore, most candidates correctly arrived at an opening
loan amount of $10 million.

• Only a minority of candidates were able to state that the difference between
the amount actually lent ($12.1 million) and the initial carrying value of the
loan ($10 million) was effectively employee compensation that needs to be
shown as an operating expense over the two-year period of the loan.

Project to improve the manufacturing process

• Overall descriptions of the recognition criteria and capitalisation of
development costs were satisfactory.

• Weaker candidates made references to IFRS 6 - Exploration for and

Evaluation of Mineral Resources. This meant that they were incorrectly
stating that costs prior to the confirmation of technical feasibility and
commercial viability were eligible for capitalisation. IFRS 6 does not apply in
this context.

• Weaker candidates often described the equipment as a current asset that

was being ‘held for sale’. This was despite the fact that the question clearly
stated that the asset had a useful life of 18 months at acquisition and was
being used in the development process. The depreciable amount of $13.5
million ($15 million - $1.5 million) was then often incorrectly impaired over
the first period. This meant that the depreciation recorded in the Statement
of Profit or Loss was missed in the first period and not added to the
capitalised cost in the second.

• Weaker candidates stated that the capitalised intangible should have been
amortised from 1 August 20X5 (the date the process was actually brought
into use) rather that 30 June 20X5 (the date the process was available for
use).

• It was in this part of the question where many simply gave their answer as a
list of journals with no additional explanatory context. As already stated, this
approach will not gain many marks.

Examiner’s report – DipIFR December 2022 11

Question Four

The candidate was placed in the position of being the financial controller of Omega
who was being questioned by a director of Omega (who was not an accountant)
regarding the financial reporting of three separate issues in the recently issued
financial statements:
• The accounting treatment of the assets and liabilities of a subsidiary in the
agricultural sector.

• The treatment of events which occurred after the end of the financial
reporting period that might have had an impact on the recently approved
financial statements.

• The purchase of some inventory from a foreign supplier.

In each case candidates were required to answer the questions that the director was
asking.
• A general observation regarding question four is that candidates should
make sure they answer the exact questions the director is asking. The form
of these questions often provides a useful structure for the candidate’s
answer and should help to prevent a candidate from producing irrelevant
material. Where candidates state facts that are true in themselves but do not
address the question(s) asked then they will not gain credit. An example in
this question would be candidates who stated that biological assets were
shown in a separate line in the statement of financial position. This is true,
but the director did not ask about this so no marks were awarded for the
statement.

Examiner’s report – DipIFR December 2022 12

I have already stated in this report that a significant number of answers to question
four were extremely short and that a significant number of candidates omitted to
provide any response. Whilst this may have indicated lack of knowledge of the
subject material it appeared that in many cases insufficient time was being devoted
to this question. This in turn would suggest poor time management across the
examination by a significant number of candidates. As previously stated, time
management is particularly important in any examination and a number of
candidates need to give this issue further attention. The specific comments given
below refer to the performance of candidates who appeared to have had enough
time to devote to this question to give it a reasonable attempt.

Where a meaningful attempt was made to this question, answers were of a variable
quality. The following comments are offered to assist future candidates for this
paper:

Subsidiary in the agricultural sector

• Overall levels of knowledge were very satisfactory on the whole here,
particularly as regards the measurement of biological assets.

• A significant minority of candidates incorrectly stated that gains or losses on

the re-measurement of biological assets were recognised in other
comprehensive income, rather than profit or loss.

Events occurring after the year-end

• Performance was more mixed here (compared with the agricultural
subsidiary).

• Many candidates correctly described adjusting and non-adjusting events but

then failed to correctly apply the definitions to the scenario. A very common
mistake was to state that the fire at the factory of a subsidiary after the year-
end was an adjusting event.

• A significant minority of candidates discussed the implications of the issue

that the fire had an adverse impact on the going concern status of the
subsidiary. In fact, the scenario said the exact opposite! This shows the
importance of thoroughly reading the question.

Purchase of inventory from a foreign supplier

• Many of the answers to this part were very good, with high marks being
obtained.

• A significant minority of candidates discussed the accounting treatment of

the closing ‘liability’. The question clearly stated that the goods had been
paid for prior to the year end.

Examiner’s report – DipIFR December 2022 13

 • A minority of candidates incorrectly stated that the closing inventory of goods
would need to be translated at the closing rate. Inventory is a non-monetary
asset, so re-translation is not appropriate.

• Very few candidates appreciated that the after-date sale of the inventory to
customers where the sale is denominated in a foreign currency caused a net
realisable value issue at the year-end.

Examiner’s report – DipIFR December 2022 14