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

IFRS 9 requires prospective reclassification from the reclassification date without restating prior recognised amounts.

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

The SPPI test ensures the cash flows are consistent with a basic lending arrangement, enabling amortised cost classification.

Question 3

Under IFRS 9, a financial liability is derecognised when:

Accepted Answer

The obligation is discharged, cancelled, or expires

Answer

IFRS 9 requires derecognition of a financial liability only when the contractual obligation is extinguished.

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

IFRS 9 hedge accounting requires formal designation, documentation, an economic relationship, and low credit risk dominance.

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

For equity instruments designated at FVOCI, gains/losses remain in OCI permanently and are not recycled.

Certificate in International Financial Reporting Practice Test