Recently when I was trying to upgrade an SQL Server 2008 R2 instance to SQL Server 2012, I was presented with an error during the upgrade rules validation.
The error message was, "The report server database is not a supported compatibility level or a connection cannot be established."
The error message was, "The report server database is not a supported compatibility level or a connection cannot be established."
When I checked the reporting server databases, the databases had the right compatibility level.
Then I found that the SQL Server Name defined in the Reporting services configuration manager was not existing. This caused the validation rule to fail.
After changing the SQL Server Name to right server name, all the validations passed and it let me upgrade the SQL Server Instance.