ACCA FR September 2026: The IFRS 16 Leases Case Most Candidates Failed (10 Marks)

Most candidates failed the 10-mark IFRS 16 leases case in the Sept/Dec 2025 FR exam — and the examiner says the biggest errors weren't even technical. They were a deposit nobody stripped out, a rounding instruction nobody read, and two exemption rules nobody bothered to learn.

The case that caught everyone

The SD25 Section B case gave Klokken Co three leases: plant with a $40,000 deposit paid at commencement, low-value tablet devices, and a sale and leaseback of property. The examiner's verdict: "Most candidates did not perform well on this case." Leases sit in syllabus area B6 and can appear in any FR sitting — in Section A, Section B, or buried in a Section C preparation question. With FR passing at just 52% in June 2026, this is a 10-mark swing you can't give away.

Error 1: The deposit trap

IFRS 16 (para 26) measures the lease liability at the present value of lease payments not paid at the commencement date. The PV of the plant lease payments was $446,500 — but $40,000 was paid on day one. The liability starts at $406,500, not $446,500.

The question asked for the year two interest expense. Few candidates got it right. The most common answer was 45 — the year one figure. Others entered $37,534 (unrounded) or 37 (rounded down) when the question said "to the nearest $'000". The examiner's point: these errors showed misreading, not missing knowledge.

Worked example: wrong vs right

Wrong: Liability $446,500 × 11% = interest of $49,115 — or answering 45, the year one unwinding.

Right: Liability $406,500 × 11% = $45,000 interest, less the $110,000 instalment = closing liability $342,000. Year two interest = $342,000 × 11% = $38,000. Answer: 38.

Error 2: Nobody learned the exemptions

Two questions tested the short-term and low-value exemptions, and the spread of answers told the examiner that candidates were guessing. The rules are short: the short-term lease election is made by class of underlying asset; the low-value election is made lease-by-lease. Exempt leases are expensed straight-line — so the tablet lease liability was simply the accrual: 12/36 months × $32,000 total payments = $11,000. Answers were spread evenly across three options. That's not a hard calculation. It's an unstudied one.

What to do

1. Strip commencement-date payments before you build the liability table. Deposit paid on day one? It never enters the lease liability. Then check which year the question actually asks for.

2. Learn the two exemption elections cold. Short-term = by class of asset. Low-value = lease-by-lease. Exempt leases = straight-line expense, with any unpaid amount as a simple accrual.

3. Obey the rounding instruction. "To the nearest $'000" means 38, not 37,534 and not 37. In a CBE number-entry box there are no method marks to rescue you.

The bottom line

One question in this case was answered well — the sale and leaseback — which the examiner notes most candidates got right. The marks lost were on day-one payments, elections, and rounding: the learnable stuff. FR passed 52% in June 2026. The IFRS 16 marks aren't hard — they're just unclaimed.