Test 1

The primary factor used to distinguish between non-strategic and strategic investments is the ______________________________.

• potential financial gain or loss on an investment
• the level of influence over the strategic decisions of the investee company.
• initial monetary outlay required to acquire the investment
• duration an investor retains ownership of the investment

IFRS 9 deals with two types of equity investments:

• Fair Value Through Profit or Loss (FVTPL)
• Amortized Cost and Historical Cost
• Fair Value Through OCI (FVTOCI)
• Amortized Cost and Fair Value Through OCI

What is the journal entry for dividend received under both FVTPL and FVOCI method?

• Dr Cash Cr Investment
• Dr Cash Cr Dividend Income

What is the journal entry for share of net income under both FVTPL and FVOCI method?

• Dr Investment Cr Equity Method Income
• Nil

Under ASPE, how can an investor with significant influence account for an investment?

• If shares are actively traded, the cost, equity, or fair value method is allowed.
• The cost or equity method is allowed, regardless of market activity.
• If shares are not actively traded, the cost method is allowed.
• Fair value can be elected, with changes in OCI.

Which of the following are indicators that an investor has significant influence over an investee?

• Representation on the board of directors
• Participation in policy-making processes
• Holding 10% of the voting shares
• Interchange of managerial personnel

According to IFRS 9, which of the following statements are true regarding investments measured at fair value?

• Fair Value Through Profit or Loss (FVTPL) investments include those held for short-term trading.
• Unrealized gains and losses for FVTOCI investments are reported in net income.
• Gains or losses on FVTOCI investments are transferred from OCI to retained earnings when the investment is sold.
• Dividends from FVTOCI investments are recognized in net income.

Which of the following is the primary factor used to distinguish between non-strategic investments and strategic investments?

• The rate of return.
• The amount paid for the investment.
• The level of influence over the strategic decisions of the investee company.
• The length of time the investment is held by the investor.

Gains and losses on fair value through profit or loss (FVTPL) investments:

• are included in net income, regardless of whether they are realized or not.
• are included in net income only when the investment has become permanently impaired.
• are included in net income only when realized.
• are not recorded until the securities are sold.

What percentage of ownership is used as a guideline to determine that significant influence exists under IAS 28 Investments in Associates and Joint Ventures?

• 25% or more
• 1% to 20%
• 20% to 50%
• 50% or more