Chartered Institute of Management Accountants (CGMA) · Advanced Financial Reporting
CIMA F2 Integrated and sustainability reporting: practice questions with answers
5 free exam-style questions on Integrated and sustainability reporting for CIMA F2 Advanced Financial Reporting. Try each one, then open the answer to read the explanation. Fincora has 24 original questions on this syllabus area.
Question 1
Wolds Farming Co is identifying climate-related risks for its IFRS S2 disclosures. Which of the following is a chronic physical risk?
- A A single severe flood that destroys a season's harvest and damages storage buildings
- B A new carbon tax on fertiliser production that raises input costs
- C A shift in supermarket buyers' preferences towards low-emission suppliers
- D Sustained higher average temperatures that steadily reduce crop yields over many years
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Answer: D. IFRS S2 splits climate-related risks into:
- Physical risks
- Acute: event-driven, such as floods, storms and wildfires
- Chronic: longer-term shifts in climate patterns, such as sustained higher temperatures, sea level rise and changing rainfall
- Transition risks: from moving to a lower-carbon economy, such as policy and legal changes, technology, market shifts and reputation
Question 2
Chadlington Water Co is preparing its integrated report. Under the Integrated Reporting Framework, which of the following is an outcome rather than an output or a business activity?
- A 180 million litres of treated drinking water supplied each day
- B 12,000 tonnes of sludge waste produced by its treatment works
- C Its programme of replacing 450 km of old water pipes during the year
- D A fall in cases of waterborne illness in the communities it supplies
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Answer: D. In the Integrated Reporting Framework's business model:
- Inputs are the capitals the organisation draws on.
- Business activities are what it does, such as building and maintaining infrastructure.
- Outputs are its key products and services, by-products and waste.
- Outcomes are the internal and external consequences, positive and negative, for the capitals resulting from its activities and outputs.
Reduced illness in the community is a consequence for people and society, so it is an outcome. The water supplied and the sludge produced are outputs, and the pipe programme is an activity.
Question 3
Ducklington Co is applying IFRS S1 and IFRS S2 for the first time for the year ended 31 December 20X7. Which transition relief is available to it in this first annual reporting period?
- A It need not disclose its Scope 3 greenhouse gas emissions.
- B It need not disclose its Scope 1 and Scope 2 greenhouse gas emissions.
- C It may report on other sustainability-related risks and opportunities and leave out climate-related disclosures.
- D It need not publish any sustainability-related disclosures until its second annual reporting period.
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Answer: A. IFRS S1 and IFRS S2 give the following reliefs in the first annual reporting period:
- no requirement to disclose Scope 3 greenhouse gas emissions (IFRS S2)
- an entity may disclose information on climate-related risks and opportunities only (the 'climate first' relief)
- no comparative information is required
- the disclosures may be published after the financial statements (for example, with the next half-year report)
- an entity may continue to use a measurement method other than the GHG Protocol if it used one before
There is no relief for Scope 1 and Scope 2 emissions.
Question 4
According to the Integrated Reporting Framework, what is the primary purpose of an integrated report?
- A To replace the annual financial statements with a single report on sustainability for all stakeholders
- B To report the organisation's impacts on the economy, environment and people, whether or not they affect its financial position
- C To show that the organisation has complied with its national corporate governance code
- D To explain to providers of financial capital how an organisation creates, preserves or erodes value over time
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Answer: D. The Integrated Reporting Framework states that the primary purpose of an integrated report is to explain to providers of financial capital how an organisation creates, preserves or erodes value over time.
An integrated report is also useful to other stakeholders interested in the organisation's ability to create value, such as employees, customers, suppliers, local communities and policy-makers. It is a concise communication about strategy, governance, performance and prospects, using the six capitals, and it complements rather than replaces the financial statements.
Question 5
Which statement best describes the role played by the International Integrated Reporting Council (IIRC) in the development of integrated reporting?
- A It was an independent regulator with the power to require listed companies to publish integrated reports and to penalise those that failed to do so.
- B It was a committee of the IASB that issued the Integrated Reporting Framework as an IFRS Accounting Standard for all entities reporting under IFRS.
- C It was a global coalition of regulators, investors, companies, standard-setters, the accounting profession and NGOs that developed and promoted the Framework.
- D It was a professional assurance body that audited integrated reports and certified whether they complied with the detailed rules of the Framework.
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Answer: C. The IIRC was a global coalition of regulators, investors, companies, standard-setters, the accounting profession, academics and non-governmental organisations. Its role was to:
- develop the principles-based International Integrated Reporting Framework; and
- promote integrated reporting and integrated thinking as part of mainstream business practice.
It had no power to make integrated reporting compulsory and did not provide assurance. The Framework remains voluntary unless a jurisdiction requires it. The IIRC's work later passed, through the Value Reporting Foundation, to the IFRS Foundation, where the IASB and the ISSB are now jointly responsible for the Framework.
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