IFRS Risk Assessment and Management 3

Question 1

Under IFRS 9, the three-stage impairment model for financial assets classifies assets in Stage 2 as those that have:

Accepted Answer

A significant increase in credit risk since initial recognition but no objective evidence of default

Answer

Stage 2 assets have experienced a significant increase in credit risk but are not yet credit-impaired, requiring lifetime ECL recognition.

Question 2

Which of the following is NOT a qualifying criterion for hedge accounting under IFRS 9?

Accepted Answer

Hedge effectiveness must be between 80% and 125%

Answer

IFRS 9 removed the strict 80–125% effectiveness bright line; instead, it requires an economic relationship and that the hedge ratio reflects actual risk management.

Question 3

An entity issues a fixed-rate bond and designates it as the hedged item in a fair value hedge using an interest rate swap. Where is the cumulative fair value adjustment to the bond reported?

Accepted Answer

As an adjustment to the carrying amount of the bond

Answer

In a fair value hedge, the carrying amount of the hedged item is adjusted for the hedged risk, with changes going through profit or loss.

Question 4

IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in:

Accepted Answer

An orderly transaction between market participants at the measurement date

Answer

Fair value under IFRS 13 is an exit price in an orderly transaction between knowledgeable, willing market participants.

Question 5

A company uses Value-at-Risk (VaR) as a market risk sensitivity metric in its IFRS 7 disclosures. What must it also disclose to help users understand the VaR methodology?

Accepted Answer

Assumptions, limitations, and parameters used in the VaR model

Answer

IFRS 7 requires entities using VaR or similar methods to explain assumptions and limitations so users can assess the reliability of the information.

(IFRS) International Financial Reporting Standards Practice Test

(IFRS) International Financial Reporting Standards Practice Test

IFRS Risk Assessment and Management 3