Question Chapter 10 & 11

For an asset in a sale and repurchase transaction where the repurchase price is set at the sales price plus a lender’s return, or where a sale of a financial asset is accompanied by a total return swap that transfers the full exposure back to the transferor:

• A financial asset (or part of a financial asset) or liability may be derecognized

• The asset or liability should be transferred to equity

• The transaction should be accounted for as a collateralized borrowing

• A financial asset (or part of a financial asset) or liability may not be derecognized

A financial asset (or part of a financial asset) or liability may be derecognized

• The asset or liability should be transferred to equity

• The transaction should be accounted for as a collateralized borrowing

• A financial asset (or part of a financial asset) or liability may be derecognized in a prior period

• A financial asset (or part of a financial asset) or liability may be derecognized in a prior period

The objective of hedge accounting is to represent, In the financial statements, the effect of an entity’s  that use financial Instruments to manage  arising from particular risks that could affect profit or loss.

• Risk management activities; exposures

• Risk mitigation activities; credit losses

• Risk diversification activities; credit concentration

• Risk mitigation activities; credit exposures

Which of the following assets is not financial asset ?

• Cash

• Prepaid expenses

• An equity instrument of another entity

• A contract that may or will be settled in the entity’s own equity instrument and is not classified as an equity instrument of the entity

Which of the following conditions give rise to derecognition of a part of an asset under IFRS 9?

• The part considered for derecognition comprises only a fully proportionate share of specifically identified cash flows from a financial asset (or a group of similar financial assets)

• The part considered for derecognition comprises only specifically identified cash flows from financial asset

• The part considered for derecognition comprises only a fully proportionate share of the cash flows from a financial asset (or a group of similar financial assets)

• All of the above

The hedging instrument is a forward contract to buy £1,000,000 GBP, spot rate at inception is €1.50 for £1, forward rate is €1.70 for £1, spot rate at maturity is €1.65 for £1, start date is 1 September 2016, and maturity date is 31 August 2017. Find the amount of the hedging instrument (use discounting factor of 1 in your calculations):

• €50,000

• €100,000

• €150,000

• €200,000