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Chapter
25 /
Financial Instruments: Recognition and Measurement
(lAS
39)
283
MULTIPLE·CHOI CE QUESTIONS
~ .
The scope of lAS 39 includes all of the following
Items except:
(a) Financial instruments that meet the defini–
tion of a financial asset.
(b) Financial instruments that meet the defini–
tion of a financial liability.
(c) Financial instrumen ts issued by the entity
that meet the definition of an equity instru–
ment.
(d) Contracts to buy or sell nonfinancial items
that can be settled net.
Answer: (c)
2. Which of the following is not a category of fi–
nancial assets defined in lAS 39?
(a) Financial assets at fair value through profit
or loss.
(b) Available-for-sale financial assets.
(c) Held-for-sale investments.
(d) Loans and receivab les.
Answer: (c)
3. All of the following are characteristics of finan–
cial assets classified as held-to-maturity investments
except:
(a) They have fixed or determin able payments
and a fixed maturity.
(b) The holder can recover substantially all of
its investment (unless there has been credit
deterioration).
(c) They are quoted in an active market.
(d) The holder has a demonstrated positive
intention and ability to hold them to matu–
rity.
Answer: (b)
4. Which of the following items is
not
precluded
from classification as a held-to-maturity investment?
(a) An investment in an unquoted debt instru–
ment.
(b) An investment in a quoted equ ity instru–
ment.
(c) A quoted derivative financial asset.
(d) An investment in a quoted debt instrument.
Answer : (d)
5.
All of the following are characteristics of
financial assets classified as loan and receivables
except:
(a) They have fixed or determinable payment s.
(b) The holder can recover substantially all of
its investment (unless there has been credit
deterioration).
(c) They are not quoted in an active market.
(d) The holder has a demon strated positive
intention and ability to hold them to matu–
rity.
Answe r : (d)
6. What is the principle for recognition of a finan–
cial asset or a financial liability in lAS 39?
(a) A financial asset is recognized when, and
only when, it is probable that future eco-
nomic benefits will flow to the entity and the
cos t or value of the instrument can be mea–
sured reliably.
(b) A financial asset is recognized when. and
only when. the entity obtains control of the
instrument and has the ability to dispose of
the financial asset independent of the actions
of others.
(c) A financia l asset is recognized when, and
only when, the entity obtains the risks and
rewards of ownership of the financial asset
and has the ability to dispose the financial
asset.
(d) A financial asset is recognized when, and
only when, the entity becomes a party to the
contractual provisions of the instrument.
Answe r : (d)
7, In which of the following circumstances is derec–
ognition of a financial asset
not
appropriate?
(a) The contra ctual rights to the cash flows of
the financial assets have expi red.
(b) The financial asset has been transferred and
substantially all the risks and reward s of
ownership of the transferred asset have also
been transferred.
(c) The financial asset has been transferred and
the entity has retained substantially all the
risks and rewards of ownership of the trans–
ferred asset.
(d) The financial asset has been transferred and
the entity has neither retained nor transferred
substantially all the risks and rewards of
ownersh ip of the transferred asset. In addi–
tion, the entity has lost control of the trans–
ferred asset.
Answer: (c)
8. Which of the following transfers of financial
assets qualifies for derecog nition?
(a) A sale of a financial asset where the entity
retains an option to buy the asset back at its
current fair value on the repurch ase date.
(b) A sale of a financial asset where the entit y
agrees to repurchase the asset in one year for
a fixed price plus interest.
(c) A sale of a portfolio of short-term accounts
receiv ables where the entity guarantees to
compen sate the buyer for any losses in the
portfolio .
(d) A loan of a security to another entity (i.e., a
securities lending transac tion).
Answer : (a)
9. Which of the following is
not
a relevant consid–
eration when evaluating whether to derecognize a
fi–
nancialliability?
(a) Whether the obligation has been dischar ged.
(b) Whether the obligation has been canceled.
(c) Whether the obligation has expired.
(d) Whether substantially all the risks and re–
wards of the obligation have been trans–
ferred .
Answer: (d)