ACCA FR September 2026: The Convertible Loan Note Journal Most Candidates Get Wrong
You can calculate the liability element perfectly and still score almost nothing. The marks are in the correcting journal — and the March/June 2025 FR examiner report says most candidates never wrote one.
What the FR examiner actually found
In the MJ25 interpretation question (Longannet Co), requirement (b) was worth 4 marks: prepare the journal entry to correctly account for the convertible loan notes, then calculate gearing. The examining team's verdict was blunt. Most candidates understood the proceeds had to be split between equity and liabilities, and the liability calculation itself "was well performed in most cases." Then it fell apart.
The reason: the question stated that the proceeds had already been credited to "Other reserves" within total equity. Most candidates didn't read that. So they wrote the initial recognition journal — Dr Cash, Cr Liability, Cr Equity — when what was needed was a correcting journal reclassifying the debt element out of Other reserves and into financial liabilities. The examiner also noted imbalanced debits and credits, and candidates confusing debits with credits outright.
Gearing then compounded it. It was "poorly performed and many candidates omitted the calculation entirely." Of those who attempted it, some used the wrong ratio despite the question explicitly defining gearing as Debt ÷ Equity, and others either made no adjustment at all or used the wrong signage — increasing equity and decreasing debt, which is backwards.
Worked example: the correcting journal
A company issues $10m of 5% convertible loan notes at par, redeemable in 5 years. The market rate on similar non-convertible debt is 8%. The full $10m proceeds have been credited to Other reserves.
Liability element = ($500k × 3.993) + ($10,000k × 0.681) = $1,997k + $6,810k = $8,807k. Equity element = $10,000k − $8,807k = $1,193k.
Wrong answer (initial recognition — scores little):
Dr Cash $10,000k / Cr Financial liabilities $8,807k / Cr Equity $1,193k
Cash is already recorded. This journal double-counts it and leaves $10m sitting incorrectly in Other reserves.
Correct answer (the correcting journal):
Dr Other reserves $10,000k / Cr Financial liabilities $8,807k / Cr Other components of equity $1,193k
Now gearing. Say debt was $12,000k and equity $40,000k before the adjustment. Debt rises by $8,807k; equity falls by $8,807k net.
Wrong: $12,000 ÷ $40,000 = 30.0% (no adjustment).
Correct: $20,807 ÷ $31,193 = 66.7%.
Same company, same numbers — and a completely different story about how the business is financed. That gap is why the examiner keeps flagging it.
Three things to do before September
1. Read what has already been recorded, then work backwards. Before you write a single line, ask: what is in the accounts now, and what should be there? The journal is the difference between those two positions. In MJ25 that one habit was worth most of the four marks.
2. Use the ratio the question defines, not the one you learned. Longannet Co said Debt ÷ Equity. Candidates who used debt ÷ (debt + equity) from memory lost the mark for no reason. Copy the definition into your workings before you calculate.
3. Show every working in the spreadsheet. The examiner is explicit: the own-figure rule rescues you when your first number is wrong, but only if clear workings are presented. Candidates who used the on-screen calculator instead of the spreadsheet scored full marks or nothing at all. Type your discount factors and your subtotals into cells.
Bottom line
FR passed 52% in June 2026 and 51% in December 2025 — the paper turns on execution, not knowledge. A 4-mark convertible loan note requirement is the kind of thing candidates skip because it looks fiddly, then wonder where the marks went. It isn't fiddly. It's two numbers, one journal, and one ratio you were handed the definition for.
Read the question. Adjust what's already there. Bank the four marks.