Accounting roles in the workplace are changing in response to new capabilities in data analytics. Accountants now can take a more strategic, future-facing role in organisations than was previously possible. Section B in the SBR exam will therefore test the specific skills and qualities that accountants need to demonstrate in the modern workplace. These skills go beyond technical knowledge and incorporate qualities such as judgement, analysis, and professional scepticism.

Question style in Section B 

A typical question 3 will be based on a modern business scenario. Candidates will be required to apply accounting standards to this scenario to reach a conclusion about the correct accounting treatments required.

A typical example would be question 3a from the March/June 2021 Strategic Business Reporting sample exam.

Sitka Co is a software development company which operates in an industry where technologies change rapidly. Its customers use the cloud to access the software and Sitka Co generates revenue by charging customers for the software licence and software updates. It has recently disposed of an interest in a subsidiary, Marlett Co, and purchased a controlling interest in Billing Co. The year end of the company is 31 December 20X7.

On 1 January 20X7, Sitka Co agreed a four-year contract with Cent Co to provide access to license Sitka Co’s software including customer support in the form of monthly updates to the software.

The total contract price is $3 million for both licensing the software and the monthly updates. Sitka Co licenses the software on a stand-alone basis for between $1 million and $2 million over a four-year period and regularly sells the monthly updates separately for $2·5 million over the same period. The software can function on its own without the updates. Although, the monthly updates improve its effectiveness, they are not essential to its functionality. However, because of the rapidly changing technology in the industry, if Cent Co does not update the software regularly, the benefits of using the software would be significantly reduced. In the year to 31 December 20X7, Cent Co has only updated the software on two occasions. Cent Co must access the software via the cloud and does not own the rights to the software.


(a)(i) Discuss whether the four-year software contract with Cent Co is a single performance obligation in accordance with IFRS 15 Revenue from Contracts with Customers including how the revenue from the contract would be accounted for in Sitka Co’s financial statements for the year ended 31 December 20X7. Your answer should include whether the revenue should be recognised at a point in time or over time.

(8 marks)

The answer required candidates to demonstrate how they used their professional judgement. Eight marks were available, so the answer should be sufficiently detailed to earn these marks. Candidates should start by stating the guidance from IFRS 15 Revenue from Contracts with Customers for identifying distinct performance obligations. Since the determination of whether the licence and updates are separate performance obligations requires judgement, a good answer would discuss both sides of the argument.  However, this was not necessary to gain maximum marks so long as the answer fully explained the rationale for concluding there was a single performance obligation or, alternatively, that there were two separate performance obligations. Marks were available for calculations of revenue on either basis, provided they were supported with a valid argument.

The next stage is the application of IFRS 15 to determine whether the revenue should be recognised at a point in time or over time. Again, candidates needed to begin by stating relevant knowledge from IFRS 15. This knowledge then needed to be applied to the scenario. This should have resulted in the conclusion that Cent Co simultaneously receives and consumes the benefits of the entity’s performance as it occurs and, therefore, that the performance obligation is satisfied over time.  Consequently, the revenue should be recognised over the four-year contract period.  Candidates would gain few marks (if any) if they simply quoted the ‘5 step revenue recognition model’ used in IFRS 15.

In questions of this type, there would normally be one mark allocated per valid point raised by a candidate. In addition, there would be a maximum number of marks (perhaps 1 or 2) allocated to an answer that simply reproduced the rules of IFRS Accounting Standards or the Conceptual Framework definitions without any application of these to the scenario. The best approach is to set out the relevant principle from the relevant IFRS Accounting Standard and then, in the next sentence, apply it to the scenario.

When the requirement does not state a particular IFRS Accounting Standard to follow, candidates should not assume that only a single IFRS Accounting Standard is relevant to their answer. In practice, there is seldom a simple solution to an issue and the same is true for the SBR exam. Moreover, there is likely to be 2 or 3 separate exhibits/scenarios in question 3.

Contemporary scenarios

Section B questions might be set in a range of contexts, such as a traditional manufacturing company or a digital company. In comparison to traditional manufacturing companies, digital companies might be involved in slightly more unusual activities, such as research and development, brand purchase and development, data management and security, software, and human capital. This is not an exhaustive list. 

It is likely that a question in section B will have an investor focus. Where they are tested, candidates should appreciate that investors do not just look at the reported profit and the statement of financial position (SOFP) to guide their investment decisions. They may base their decisions on the company’s business model or its intangible assets, some of which may not be recognised on the SOFP. These days, many companies are providing investors with significant non-financial information, including information on environmental and social issues. Financial statements remain vital for investors when evaluating a company but are not their sole source of information.

Investors are likely to react differently to a digital company that reports financial statement losses as opposed to an industrial company that reports similar losses. This is because digital companies often have significant outgoings when they begin to operate, particularly on research and development, meaning that it can take several years before profits are generated. Candidates should appreciate the different concerns of stakeholders in different types of companies.

Digital companies are also more likely to handle big data or invest in cryptocurrency. This means that there might not be an existing IFRS Accounting Standard that determines the correct accounting treatment in a given scenario. If a question was set in this area, marks would be awarded for general discussion of the principles in the Conceptual Framework and then the application of these principles to the scenario.

A typical example of a question covering investor issues with a contemporary focus would be question 4a from the September/December 2021 Strategic Business Reporting sample exam:


(a) Explain the principles of good disclosure which should be used to inform investors regarding the company’s holding of crypto assets.

Note: There is no need to refer to any exhibit when answering part (a).

(6 marks)

Professional marks will be awarded in part (a) for clarity and quality of discussion.

(2 marks)

As can be seen, this question deals with a contemporary issue but also has an investor focus. A candidate would have gained one mark for each point raised, as well as two professional marks for the clarity and quality of the discussion.

A good starting point would be the Conceptual Framework: what information do investors need, and what would make that information useful?

Financial information is useful if it is relevant and if it offers a faithful representation of the underlying transaction. Entity-specific information will be more relevant to investors than generic disclosures. Another central aspect of relevance is the concept of materiality, which should be used by management when deciding what information to disclose.

The accounting treatment of crypto assets is not specifically governed by an IFRS Accounting Standard. As such, management must use its judgement when determining an appropriate accounting policy. This information is material to the users of the financial statements as it will help them to understand how the crypto assets have been measured in the financial statements. If historical cost measures have been used, then investors may need to make adjustments to the published financial information when determining the entity’s future net cash flows.

The usefulness of financial information is enhanced if it is timely, verifiable, understandable, and comparable. Candidates should try and use some of these characteristics to structure their answer. For example, the information presented in the financial statements should be organised in a way which emphasises material matters rather than obscuring or omitting them. Similarly, information about the fair value of crypto assets should be presented in a way which will enable users to verify the measurement and to compare one entity with another.

Candidates can gain more than one mark per point if they expand and discuss a point more fully. Any additional points raised by candidates that are valid, but not necessarily in the suggested solution, would have gained credit. It is obvious from the above discussion that there is a minimum level of content required to pass the SBR exam and so one or two bullet points will not be sufficient. 


Section B can contain any element of the syllabus but is likely to be scenario-based. Some questions may cover interpretation. Interpretation in the context of a SBR question will not simply involve the calculation of a standard set of ratios alongside comments on an entity’s financial performance or position. Instead, it might consider the impact of different accounting treatments on key figures in the financial statements. Candidates might also be asked about the impact of transactions on key performance indicators or additional performance measures. This may require discussion of the impact on investors.

A typical example would be question 3a from the September/December 2021 Strategic Business Reporting sample exam.

Question 3a asked the following:

Company cars

On 1 January 20X7, Stem Co is considering providing company cars for its senior management and is comparing three options.

Option 1
The cars can be leased for a period of four years starting on 1 January 20X7. The cars have a total market value of $75,274 on this date. The lease requires payments of $1,403 on a monthly basis for the duration of the lease term of which $235 is a servicing charge. Stem Co wishes to show the servicing charge as a separate line item in profit or loss. At the end of the four‐year period, there is no option to renew the lease or purchase the cars, and there is no residual value guarantee. The interest to be charged for the year ended 31 December 20X7 is correctly calculated at $2,274 based upon the implicit interest rate in the lease. The net present value of the lease payments over four years is $50,803 excluding the service charge.

Option 2
The cars can be purchased for $75,274 with a 100% bank loan. The cars would be purchased on 1 January 20X7 and held for four years. The estimated residual value is $29,753. Monthly service costs would still be $235 per month. The loan would be repayable in four annual instalments commencing 1 January 20X8. Assume that an average annual percentage rate on a loan is 5%.

Option 3
A final alternative is to lease the cars with a 12‐month agreement on 1 January 20X7 with no purchase option. The cost would be $1,900 per month in advance including servicing charge. Stem Co would take advantage of the short‐term lease exemption under IFRS 16 Leases.


(a) Explain, with suitable calculations, the impact of the three alternative company car options on:

– earnings before interest, tax, depreciation and amortisation (EBITDA)

– profit before tax, and

– the statement of financial position for the year ended 31 December 20X7.

Note: Candidates should refer to IFRS 16 Leases where appropriate.

(13 marks)

The question was allocated 13 marks and so candidates were required to set out 13 valid points to get those marks. There are far more than 13 points in the suggested solution.

A good starting point is to determine the relevant accounting treatment of each of the three options. Options 1 and 3 both clearly state that the arrangement is a lease, and so IFRS 16 Leases is appropriate. In contrast, option 2 involves taking out a bank loan to buy the assets; as such, IAS 16 Property, Plant and Equipment, and IFRS 9 Financial Instruments are relevant.

Option 3 is a short-term lease so is arguably the most straight-forward of the issues. It would therefore be a good place to start. Using the exemption in IFRS 16, an expense should be recognised in profit or loss on a straight-line basis over the lease term. As such, an expense of $22,800 ($1,900 x 12 months) would be recognised. This would reduce EBITDA and profit for the year by $22,800. No asset or liability would be recognised in the statement of financial position.

Note that the above answer specifies the accounting treatment of the short-term lease, calculates the expense, and identifies the impact on EBITDA and profit, as well as the statement of financial position. This would have scored 4 marks. A similar approach should be taken for options 1 and 2.

For option 1, candidates should have:

  • outlined the accounting treatment of leases in the financial statements of lessees
  • identified that the expense for the year comprises the servicing cost, depreciation on the right-of-use asset, and the interest on the lease liability, all of which would reduce the profit before tax
  • commented that the servicing cost reduces EBITDA, but that depreciation and interest have no impact on EBITDA
  • calculated the year end carrying amount of the right-of-use asset, and
  • calculated the year end lease liability and explain that this will be split between a current and non-current liability.

Credit would also have been given for the discussion of key ratios. For example, options 1 and 2 would lead to the recognition of liabilities, which would affect gearing.

In this question, roughly half of the marks were allocated to a discussion of the correct accounting treatment and the other half was given to the impact on the financial statements. Thus, candidates would probably not pass the question if they simply focused on one area or the other. To have the best chance of passing, it is important to address all parts of the requirement.


The purpose of this article was to demonstrate to candidates how their knowledge of the principles in the Conceptual Framework and IFRS Accounting Standards should be applied to question scenarios, as this is the skill that will attract marks in the SBR exam. Having read this article, candidates should now attempt to answer exam questions under exam conditions, using the practice platform.

Think about the advice given above and try to apply your knowledge in the way suggested. Compare your answer to the suggested solutions provided and, from a markers perspective, think about where the marks might be awarded. Use this strategy when you practice past exam questions and you will see how your answers develop more depth and provide useful and robust advice that is based on widely-accepted accounting principles.  

Written by a member of the Strategic Business Reporting examining team