Certificate in International Financial Reporting Financial Instruments 2

Question 1

Under IFRS 9, when an entity reclassifies financial assets, where is the effect recognised?

Accepted Answer

Prospectively from the reclassification date with no restatement of prior gains or losses

Answer

Retrospectively with restatement of all prior periods

Answer

In OCI only

Answer

In retained earnings only

Question 2

Under IFRS 9, what is the 'SPPI' test used to determine?

Accepted Answer

Whether contractual cash flows are solely payments of principal and interest

Answer

Whether the instrument should be fair valued

Answer

Whether hedge accounting can be applied

Answer

Whether the entity has significant influence

Question 3

Under IFRS 9, a financial liability is derecognised when:

Accepted Answer

The obligation is discharged, cancelled, or expires

Answer

The carrying amount is paid

Answer

The liability is renegotiated

Answer

A new creditor is identified

Question 4

Under IAS 39/IFRS 9, hedge effectiveness requires a hedge relationship to be:

Accepted Answer

Documented at inception, with an economic relationship and no credit risk dominating

Answer

Perfectly offsetting at all times

Answer

Approved by auditors

Answer

Based on derivatives only

Question 5

Under IFRS 9, gains and losses on financial assets designated as FVOCI (equity instruments) are:

Accepted Answer

Recognised in OCI and never recycled to profit or loss

Answer

Recognised in profit or loss on disposal

Answer

Recognised in OCI and recycled on disposal

Answer

Recognised directly in retained earnings

Question 6

Under IFRS 7, a sensitivity analysis for interest rate risk must show:

Accepted Answer

The effect of a reasonably possible change in rates on profit or loss and equity

Answer

The exact hedging position at year-end

Answer

All interest-bearing instruments at fair value

Answer

The maximum possible loss scenario