Question 1

**Section A**

BioGenix Ltd, a pharmaceutical startup, has spent $2 million on researching a new synthetic protein. The directors want to capitalize this cost as an intangible asset to improve the appearance of the statement of financial position, even though the project has not yet demonstrated technical feasibility.

Which fundamental qualitative characteristic of financial information would be breached if BioGenix capitalizes these research costs?

Accepted Answer

Recall the fundamental qualitative characteristics from the Conceptual Framework (Relevance and Faithful Representation). Consider which one deals with accurately depicting economic reality.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Students often confuse fundamental characteristics (Relevance, Faithful Representation) with enhancing characteristics (Comparability, Verifiability, Timeliness, Understandability).

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 1

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