FAFVPL

According to IFRS 9, on initial recognition, the entity has the option of designating financial assets to be measured at FVPL

• if doing so provides more relevant and more reliable information

• if doing so reduces “accounting mismatch”

• if it is required by “shadow accounting”

• at the entity’s management absolute discretion

Under IFRS 9, financial assets at fair value through profit or loss are

• held for trading securities

• designated financial assets

• FVOCI

• both held for trading securities and designated financial assets

Financial assets are initially measured

• at fair value

• at fair value plus direct transaction costs

• at fair value plus direct transaction costs, except in the case of financial assets at fair value through profit orloss where direct transaction costs are expensed immediately

• at cost, in cases where the quoted prices of the financial assets are indeterminable

Subsequent changes in fair values of a financial asset classified as fair value through profit or loss are

• recognized in profit or loss

• recognized in total comprehensive income

• recognized in other comprehensive income

• ignored

An entity sells its investment in FVPL during the year. The realized gain or loss on the sale is computed as

• the difference between the sale price and the carrying amount of the investment as at the date of sale

• the difference between the sale price and the original acquisition cost of the investment

• the difference between the net proceeds received from the sale and the carrying amount of the investment as at the date of sale

• the difference between the net proceeds received from the sale and the carrying amount of the investment as at the date of sale adjusted for any accumulated fair value gains or losses recognized since the investment was acquired

Financial assets at fair value through profit or loss include

I. Financial assets whose business model for managing the asset are held for “trading”

II. Financial assets that are “designated” on initial recognition as at fair value through profit or loss.

• I only

• II only

• Both I and II

• Neither I nor II

If the financial asset is measured at fair value through profit or loss, transaction costs directly attributable to the acquisition shall be

• Capitalized as cost of the financial asset

• Expensed immediately when incurred

• Deferred and amortized over a reasonable period

• Included as component of other comprehensive income

Which of the following statements is true concerning recognition of unrealized gains and losses on financial assets?

I. Unrealized gains and losses on financial assets held for trading shall be included in profit or loss.

II. Unrealized gains and losses on financial assets measured at amortized cost shall be included as component of other comprehensive income.

• I only

• II only

• Both I and II

• Neither I nor II

On October 1, 2019, Fluorine Company, with a business model of trading debt securities, purchased a P2,000,000 face value 9% debt instruments, with a remaining term of 2 years and three months for P2,174,867, which included accrued interest of P135,000. The prevailing market rate of interest at the time of acquisition was 8%. Interest is being received every December 31. On December 31, the fair market value of the instruments is P2,072,321 based on prevailing market rate of 7%. What amount of unrealized gain or loss should Fluorine Company report in its December 31, 2019 profit or loss?

• None

• P32,454

• P102,546

• P135,000

On January 1, 2019, Gold Company purchased the debt instruments of Helium Company with a face value of P5,000,000 bearing interest rate of 8% for P4,621,006 to yield 10% interest per year. The bonds mature on January 1, 2024 and pay interest annually on December 31. On December 31, 2019, the fair value of the investment is P4,838,014 which is based on the prevailing market rate of 9%. If the company’s business model has the objective of trading and making a profit from changes in the fair value of the securities, what amount of unrealized gain or loss should the company disclose in the December 31. 2019 profit or loss?

• None

• P26,559 unrealized gain

• P154,907 unrealized gain

• P217,008 unrealized gain