ACCCOB2_4_Investments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

• T

• F

The presumption in equity investments is that it will provide dividends income and share price increases.

• T

• F

Equity investments accounted for at FVOCI are trading investments of less than 20%.

• T

• F

What is the principle for recognition of a financial asset?

• A financial asset is recognized when it is probable that future economic benefits will flow to the entity.

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

• A financial asset is recognized when the entity obtains the risks and rewards of ownership of the financial asset.

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

Dividends received from an associate is considered an investment income just like in equity investments held at fair value.

• T

• F

Investment in bonds make an entity a creditor rather than a co-owner of the issuing corporation.

• T

• F

Bond investments held for trading are reported at

• Fair value

• Amortized cost

• Face amount

• Maturity

To compute the price to pay for a bond designated as FA-FVPL, transactions costs are included as part of the cost of the financial asset.

• T

• F

A debt investment shall be measured subsequently at amortized cost

• By irrevocable election

• When the debt investment is managed and evaluated on a document risk-management strategy

• When the business model is to collect contractual cash flows that are solely payments of principal and interest and the investment is held to maturity

• When the business model is to hold and collect principal and interest and to sell anytime

The actual interest earned by the bondholder is based on

• Nominal rate

• Effective rate

• Not expected

• Agreed rate