Check-Up Quiz

Under PFRS 9, what is the principle for the recognition of financial asset?

• A financial asset is recognized when the entity obtains the risks and rewards of ownership of the financial asset and has the ability to dispose the financial asset

• a financial asset is recognized when it is probable that future economic benefits will flow to the entity and the cost of the instrument can be measured reliably

• A financial asset is recognized when the entity becomes a party to the contractual provisions of the instrument

• A financial asset is recognized when the entity obtains control of the instrument

How does PFRS 9 distinguish between the measurement methods to be used?

• By reviewing the realizability and the contractual cash flow characteristics of the instrument

• By reviewing the business model of each entity and the risk and rewards of the transaction

• By reviewing the business model of each entity and the contractual cash flow characteristics of the instrument.

• By reviewing the realizability of the instrument and risks and rewards of ownership

Unrealized gains and losses on trading investments are included in earnings because

• The BIR mandates the inclusion

• The SEC mandates the inclusion

• The gains and losses measure the carrying amount of the investments

• The gains and losses measure the success or failure of taking advantage of short-term price changes

What is the effect of an increase in fair value of equity investment on shareholders’ equity?

• Lower under FVOCI than FVPL

• Higher under FVOCI than FVPL

• Not possible to identify given this information

• The same under both FVOCI and FVPL

Under what circumstances can an entity classify financial assets that meet the amortized cost criteria as at FVPL?

• If doing so eliminates or reduces an accounting mismatch

• Where the financial asset passes the contractual cash flow characteristics test

• Where the business model approach is adopted

• Where the instrument is held to maturity

Under the revised conceptual framework, when is an asset recognized?

• It is probable that the economic benefits will flow to the entity and that the cost can be measured reliably.

• It is probable that the economic benefits will flow to the entity.

• The item meets the definition of an asset

• The costs of the asset can be measured reliably

All of the following debt investments may be reclassified into another category, except

• Held for trading debt investments

• Debt investments at FVOCI

• Debt investments at FVPL by fair value option.

• Debt investments at amortized costs

All of the following financial assets are subject to impairment, except

• Bond investment at FVPL

• Bond investment at amortized cost

• Bond investment at FVOCI

• Loan receivable at amortized cost

An entity changes its business model for a financial asset on December 31, 2019. On what date shall the entity reclassify the financial asset?

• January 1, 2019

• December 31, 2019

• January 1, 2020

• December 31, 2020

Which statement is incorrect concerning equity method?

• The investor’s share of the profit or loss of the investee is recognized in the investor’s profit or loss.

• Distributions received from the investee are recognized in the investor’s profit or loss.

• The investment in associate is initially recorded at cost.

• The investment in associate is increased or decreased by the investor’s share of the profit or loss of the investee after the date of acquisition.