Certificate in International Financial Reporting Financial Instruments 1

Question 1

Under IFRS 9, financial assets are classified into how many measurement categories?

Accepted Answer

Three

Answer

IFRS 9 has three categories: amortised cost, fair value through OCI (FVOCI), and fair value through profit or loss (FVTPL).

Question 2

Under IFRS 9, a financial asset is measured at amortised cost if it passes which two tests?

Accepted Answer

Business model test (hold to collect) and SPPI test

Answer

Amortised cost classification requires the asset to be held to collect contractual cash flows that are solely payments of principal and interest.

Question 3

Under IFRS 9, the Expected Credit Loss (ECL) model applies to which financial instruments?

Accepted Answer

Financial assets measured at amortised cost and FVOCI, and loan commitments

Answer

IFRS 9's ECL impairment model applies to debt instruments at amortised cost or FVOCI, and certain off-balance sheet exposures.

Question 4

Under IFRS 9, Stage 1 of the ECL model requires recognising impairment based on:

Accepted Answer

12-month expected credit losses

Answer

Stage 1 covers instruments with no significant increase in credit risk, requiring only 12-month ECL.

Question 5

Under IAS 32, a financial instrument is classified as equity rather than a financial liability when:

Accepted Answer

The issuer has no contractual obligation to deliver cash or another financial asset

Answer

IAS 32 classifies instruments as equity when the issuer has no contractual obligation to pay cash.

Certificate in International Financial Reporting Practice Test