Financial Instruments Flashcards

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

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

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

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

Answer: Whether contractual cash flows are solely payments of principal and interest

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

Under IFRS 9, a financial liability is derecognised when:

Answer: The obligation is discharged, cancelled, or expires

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

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

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

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

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

Answer: Recognised in OCI and never recycled to profit or loss

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

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

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

IFRS 7 requires entities to disclose how a reasonably possible change in rates would affect reported results.