Please review the following notes:
12.1.3 E-Business Suite Users Homepage Intermittently Get FND_SESSION_MGR_INST_ERROR After Login (Doc ID 2149258.1)
PHP Responsibilities Do Not Expand To Show Related Functions (responsibility List Is Visible) (Doc ID 2199939.1)
First I would clear cache with functional administrator then see if you have recently applied any patches which may have caused this.
It is just a newly cloned instance from PROD to TEST server.
Maybe due to cloning, there are init.ora parameters revert back to standard default value?
What init.ora parameter usually affects or relates to this error?
Hard to tell. I would run the bde_chk_cbo.sql as the apps user and see what is not set correctly.
bde_chk_cbo.sql - EBS initialization parameters - Healthcheck (Doc ID 174605.1)
If you are trying to use IE11, you may need to review the R12 browser document.
R12: Recommended Browsers for Oracle E-Business Suite (Doc ID 389422.1)
Also clear the cache and see if that helps:
How To Clear The Cache Using Functional Administrator? (Doc ID 759038.1)