Question 1

IFRS 7 imposes further detailed disclosure requirements for which of the following credit risks?

Accepted Answer

A) the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. 
B) the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. 
C) the risk that the fair value of a financial instrument will fluctuate because of changes in market prices. 
D) the risk that the future cash flows of a financial instrument will fluctuate because of changes in market prices. 
A) the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. 
B) the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. 
C) the risk that the fair value of a financial instrument will fluctuate because of changes in market prices. 
D) the risk that the future cash flows of a financial instrument will fluctuate because of changes in market prices.

Question 2

Under IAS 23,interest incurred on a financial instrument,is able to be capitalised as part of a qualifying asset.When this is done:

Accepted Answer

A) interest is never expensed. 
B) interest will be expensed as part of cost of goods sold when the asset is sold. 
C) interest will be expensed as part of the accounts payable balance. 
D) interest is recognised immediately. 
A) interest is never expensed. 
B) interest will be expensed as part of cost of goods sold when the asset is sold. 
C) interest will be expensed as part of the accounts payable balance. 
D) interest is recognised immediately.

Question 3

Companies may be motivated to enter into a foreign currency swap in order to hedge receivables held in the currency of the loan,the obligations of which they will undertake in the swap.

Accepted Answer

A) True 
 B)False

Question 4

A change in classification of a financial instrument may occur as a result of 'revised probabilities' of,for example,conversion.

Accepted Answer

A) True 
 B)False

Question 5

A derivative financial instrument is one which:

Accepted Answer

A) creates a contractual link between two entities such that the financial asset or equity item of one entity becomes the financial liability of the other entity and there is a transfer of risks and returns. 
B) creates rights and obligations that have the effect of transferring one or more of the financial risks inherent in an underlying primary financial instrument, and the value of the contract normally reflects changes in the value of the underlying financial instrument. 
C) creates a contractual link between a secondary financial instrument and a primary financial instrument such that there is an ultimate transfer of a financial asset between the contracting parties. 
D) creates rights and obligations that have the effect of transferring the financial returns inherent in an underlying primary financial instrument, and the value of the contract normally reflects changes in the value of the underlying financial instrument. 
A) creates a contractual link between two entities such that the financial asset or equity item of one entity becomes the financial liability of the other entity and there is a transfer of risks and returns. 
B) creates rights and obligations that have the effect of transferring one or more of the financial risks inherent in an underlying primary financial instrument, and the value of the contract normally reflects changes in the value of the underlying financial instrument. 
C) creates a contractual link between a secondary financial instrument and a primary financial instrument such that there is an ultimate transfer of a financial asset between the contracting parties. 
D) creates rights and obligations that have the effect of transferring the financial returns inherent in an underlying primary financial instrument, and the value of the contract normally reflects changes in the value of the underlying financial instrument.

Question 6

Which of the following financial instruments can underlie an option contract?

Accepted Answer

A) interest bearing instruments 
B) financial assets 
C) shares in other entities 
D) all of the given answers 
A) interest bearing instruments 
B) financial assets 
C) shares in other entities 
D) all of the given answers

Question 7

The structure of futures contracts as they are traded in future markets is best described in which of the following?

Accepted Answer

A) All parties that trade in futures make a (relatively small) specific deposit before they enter into the contract.The contract is marked to market on a daily basis and gains on the contract are added to the deposit and losses are deducted.When the deposit reaches a minimum level a margin call will be made to require the trader to reinstate the original deposit. 
B) The purchaser of the futures contract is given a set price at which they can exercise the futures contract at or up to a specified date.If during that time or up to that date the buyer of the futures contract decides to exercise it, the buyer pays the exercise price and the seller of the contract agrees to deliver the item within a specified period of the exercise date.In the case of financial futures, they are often closed out before delivery is required. 
C) All buyers of futures contracts make a specific deposit that is held in trust by the other party to the contract.As the buyer makes gains, these are deducted from the amount of deposit held by the seller.As the seller makes gains on the contract, the buyer is required to increase the deposit to maintain the same percentage value of deposit.At the delivery date on the contract the deposit has already accumulated the gains and losses and all that is required is for the seller to deliver on the contract.In the case of financial futures, they are often closed out before delivery is required. 
D) A futures contract contains an agreement to buy and sell a specified item or financial asset or index at a future date and at an agreed price.The parties to the contract are not required to make any financial commitment at the beginning of the contract, hence futures contracts are considered highly levered and risky for speculation purposes.The buyer pays the agreed sum on delivery by the seller or the contract is closed out before the delivery date. 
A) All parties that trade in futures make a (relatively small) specific deposit before they enter into the contract.The contract is marked to market on a daily basis and gains on the contract are added to the deposit and losses are deducted.When the deposit reaches a minimum level a margin call will be made to require the trader to reinstate the original deposit. 
B) The purchaser of the futures contract is given a set price at which they can exercise the futures contract at or up to a specified date.If during that time or up to that date the buyer of the futures contract decides to exercise it, the buyer pays the exercise price and the seller of the contract agrees to deliver the item within a specified period of the exercise date.In the case of financial futures, they are often closed out before delivery is required. 
C) All buyers of futures contracts make a specific deposit that is held in trust by the other party to the contract.As the buyer makes gains, these are deducted from the amount of deposit held by the seller.As the seller makes gains on the contract, the buyer is required to increase the deposit to maintain the same percentage value of deposit.At the delivery date on the contract the deposit has already accumulated the gains and losses and all that is required is for the seller to deliver on the contract.In the case of financial futures, they are often closed out before delivery is required. 
D) A futures contract contains an agreement to buy and sell a specified item or financial asset or index at a future date and at an agreed price.The parties to the contract are not required to make any financial commitment at the beginning of the contract, hence futures contracts are considered highly levered and risky for speculation purposes.The buyer pays the agreed sum on delivery by the seller or the contract is closed out before the delivery date.

Question 8

Pigeon Plc holds a well-diversified portfolio of shares with a current market value on 1 May 2014 of £900 000.On this date Pigeon Plc decides to hedge the portfolio by taking a sell position in ten FTSE 100 IDX futures units.The FTSE 100 IDX is 2980 on 1 May 2014.A unit contract in FTSE 100 IDX futures is priced based on FTSE 100 IDX and a price of £25.The futures broker requires a deposit of £1500.On 30 June the FTSE 100 IDX has fallen to 2570 and the value of the company's share portfolio has fallen to $790 000.What is the gain or loss on the futures contract and the net gain or loss after hedging?

Accepted Answer

A) loss on futures contract £102 500; net gain after hedging £6000 
B) gain on futures contract £10 250; net loss after hedging £99 750 
C) gain on futures contract £102 500; net loss after hedging £7500 
D) gain on futures contract £164; net loss after hedging £109 836 
A) loss on futures contract £102 500; net gain after hedging £6000 
B) gain on futures contract £10 250; net loss after hedging £99 750 
C) gain on futures contract £102 500; net loss after hedging £7500 
D) gain on futures contract £164; net loss after hedging £109 836

Question 9

Discuss the economic effect of issuing a compound instrument.

Accepted Answer

Paragraph 29 of IAS 32 states,the econom

Question 10

Sampras Plc issued £20 million of convertible notes on 1 July 2013.The notes have a life of 6 years and a face value of £20 each.Annual interest of 5% is payable at the end of each year.The notes were issued at their face value and can be converted at any time over their lives.Organisations with a similar risk profile to Sampras Plc have issued debt with similar terms but without the option to convert at the rate of 7%.What are the appropriate accounting entries to record the issue of the convertible notes and the first payment of interest in accordance with guidance provided in IAS 32?

Accepted Answer

A)  $$\begin{array}{l}
1 \text { July } 2013\
\begin{array} { | c | l | c | c | } 
\hline \text { Dr } & \text { Cash at bank } & 20000000 & \
\hline \mathrm { Cr } & \text { Convertible notes } & & 20000000 \
\hline & & & \
\hline  { \text { June } 2014 } & & \
\hline \mathrm { Dr } & \text { Interest expense } & 1000000 & \
\hline \mathrm { Cr } & \text { Cash at bank } & & 1000000 \
\hline
\end{array}
\end{array}$$ 
B)  $$\begin{array}{l}
1 \text { July } 2013\
\begin{array} { | c | l | r | r | } 
\hline \mathrm { Dr } & \text { Cash at bank } & 20000000 & \
\hline \mathrm { Cr } & \text { Convertible notes liability } & & 18093384 \
\hline \mathrm { Cr } & \text { Option to convert notes to equity } & & 1906616 \
\hline & & & \
\hline 30 \text { June } 2014 & & \
\hline \mathrm { Dr } & \text { lnterest expense } & 1266537 & \
\hline \mathrm { Cr } & \text { Cash at bank } & & 1000000 \
\hline \mathrm { Cr } & \text { Convertible notes liability } & & 266537 \
\hline
\end{array}
\end{array}$$ 
C)  $$\begin{array}{l}
1 \text { July } 2013\
\begin{array} { | c | l | r | r | } 
\hline \mathrm { Dr } & \text { Cash at bank } & 20000000 & \
\hline \mathrm { Cr } & \text { Option to convert notes to equity } & & 18093384 \
\hline \mathrm { Cr } & \text { Convertible notes liability } & & 1906616 \
\hline & & & \
\hline 30 \text { June } 2014 & & & \
\hline \mathrm { Dr } & \text { lnterest expense } & 1266537 & \
\hline \mathrm { Cr } & \text { Cash at bank } & & 1000000 \
\hline \mathrm { Cr } & \text { Option to convert notes to equity } & & 266537 \
\hline
\end{array}
\end{array}$$ 
D)  $$\begin{array}{l}
1 \text { July } 2013\
\begin{array} { | c | l | r | r | } 
\hline \text { Dr } & \text { Cash at bank } & 20000000 & \
\hline \mathrm { Dr } & \text { Option to convert notes to equity } & 2030277 & \
\hline \mathrm { Cr } & \text { Convertible notes liability } & & 22030277 \
\hline & & & \
\hline 30 \text { June } 2014 & & \
\hline \mathrm { Dr } & \text { lnterest expense } & 1542119 & \
\hline \mathrm { Cr } & \text { Cash at bank } & & 1000000 \
\hline \mathrm { Cr } & \text { Convertible notes liability } & & 542119 \
\hline
\end{array}
\end{array}$$ 
A)  $$\begin{array}{l}
1 \text { July } 2013\
\begin{array} { | c | l | c | c | } 
\hline \text { Dr } & \text { Cash at bank } & 20000000 & \
\hline \mathrm { Cr } & \text { Convertible notes } & & 20000000 \
\hline & & & \
\hline  { \text { June } 2014 } & & \
\hline \mathrm { Dr } & \text { Interest expense } & 1000000 & \
\hline \mathrm { Cr } & \text { Cash at bank } & & 1000000 \
\hline
\end{array}
\end{array}$$ 
B)  $$\begin{array}{l}
1 \text { July } 2013\
\begin{array} { | c | l | r | r | } 
\hline \mathrm { Dr } & \text { Cash at bank } & 20000000 & \
\hline \mathrm { Cr } & \text { Convertible notes liability } & & 18093384 \
\hline \mathrm { Cr } & \text { Option to convert notes to equity } & & 1906616 \
\hline & & & \
\hline 30 \text { June } 2014 & & \
\hline \mathrm { Dr } & \text { lnterest expense } & 1266537 & \
\hline \mathrm { Cr } & \text { Cash at bank } & & 1000000 \
\hline \mathrm { Cr } & \text { Convertible notes liability } & & 266537 \
\hline
\end{array}
\end{array}$$ 
C)  $$\begin{array}{l}
1 \text { July } 2013\
\begin{array} { | c | l | r | r | } 
\hline \mathrm { Dr } & \text { Cash at bank } & 20000000 & \
\hline \mathrm { Cr } & \text { Option to convert notes to equity } & & 18093384 \
\hline \mathrm { Cr } & \text { Convertible notes liability } & & 1906616 \
\hline & & & \
\hline 30 \text { June } 2014 & & & \
\hline \mathrm { Dr } & \text { lnterest expense } & 1266537 & \
\hline \mathrm { Cr } & \text { Cash at bank } & & 1000000 \
\hline \mathrm { Cr } & \text { Option to convert notes to equity } & & 266537 \
\hline
\end{array}
\end{array}$$ 
D)  $$\begin{array}{l}
1 \text { July } 2013\
\begin{array} { | c | l | r | r | } 
\hline \text { Dr } & \text { Cash at bank } & 20000000 & \
\hline \mathrm { Dr } & \text { Option to convert notes to equity } & 2030277 & \
\hline \mathrm { Cr } & \text { Convertible notes liability } & & 22030277 \
\hline & & & \
\hline 30 \text { June } 2014 & & \
\hline \mathrm { Dr } & \text { lnterest expense } & 1542119 & \
\hline \mathrm { Cr } & \text { Cash at bank } & & 1000000 \
\hline \mathrm { Cr } & \text { Convertible notes liability } & & 542119 \
\hline
\end{array}
\end{array}$$

Question 11

Under IFRS 9,an entity is required to recognise a financial asset or liability on its statement of financial position when,and only when,it becomes a party to the contractual provisions of the instrument.

Accepted Answer

A) True 
 B)False

Question 12

The classification of a preference share as an equity instrument or financial liability is:

Accepted Answer

A) affected by a history of making distributions. 
B) affected by an intention to make distributions in the future. 
C) not affected by a history of making distributions. 
D) not affected by the other rights that attach to them if they are non-redeemable. 
A) affected by a history of making distributions. 
B) affected by an intention to make distributions in the future. 
C) not affected by a history of making distributions. 
D) not affected by the other rights that attach to them if they are non-redeemable.

Question 13

Partridge Plc holds a well-diversified portfolio of shares with a current market value on 1 April 2014 of €1 million.On this date Partridge Plc decides to hedge the portfolio by taking a sell position in 15 Amsterdam IDX futures units.The Amsterdam Index is 3130 on 1 April 2014.A unit contract in Amsterdam IDX futures is priced based on the Amsterdam Index and a price of €25.The futures broker requires a deposit of €80 000.On 30 June the Amsterdam Index has fallen to 2980 and the value of the company's share portfolio has fallen to €950 000.On 1 July 2014 Partridge Ltd decides to sell its shares and close out its futures contract.At this date the portfolio has a market value of €925 000 and the Amsterdam Index is 2900.Assume all entries have been made mark to market on the futures contract and record changes in the deposit up to 1 July.What are the entries to record the transactions of 1 July 2014 (only)?

Accepted Answer

A)  $$\begin{array} { | l | l | r | r | } 
\hline \text { Dr } & \text { Cash } & 925000 & \
\hline \mathrm { Cr } & \text { Share portfolio } & & 925000 \
\hline & & & \
\hline \mathrm { Dr } & \text { Deposit held by broker } & 30000 & \
\hline \mathrm { Cr } & \text { Gain on futures contract } & & 30000 \
\hline & & & \
\hline \mathrm { Dr } & \text { Cash at bank } & 166250 & \
\hline \mathrm { Cr } & \text { Deposit held by broker } & & 166250 \
\hline & & & \
\hline \mathrm { Dr } & \text { Futures payable } & 1340000 & \
\hline \mathrm { Cr } & \text { Gain on futures contract } & & 166250 \
\hline \mathrm { Cr } & \text { Futures receivable } & & 1173750 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | r | r | } 
\hline \text { Dr } & \text { Cash } & 925000 & \
\hline \text { Dr } & \text { Loss on share portfolio } & 75000 & \
\hline \mathrm { Cr } & \text { Share portfolio } & & 1000000 \
\hline & & & \
\hline \text { Dr } & \text { Deposit on futures contract } & 30000 & \
\hline \mathrm { Cr } & \text { Gain on futures contract } & & 30000 \
\hline & & & \
\hline \mathrm { Dr } & \text { Cash at bank } & 166250 & \
\hline \mathrm { Cr } & \text { Deposit on futures contract } & & 166250 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | r | l | } 
\hline \text { Dr } & \text { Cash } & 925000 & \
\hline \text { Dr } & \text { Loss on share portfolio } & 25000 & \
\hline \mathrm { Cr } & \text { Share portfolio } & & 950000 \
\hline & & & \
\hline \text { Dr } & \text { Deposit held by broker } & 30000 & \
\hline \mathrm { Cr } & \text { Gains on futures contract } & & 30000 \
\hline & & & \
\hline \text { Dr } & \text { Cash at bank } & 166250 & \
\hline \mathrm { Cr } & \text { Deposit held by broker } & & 166250 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | r | r | } 
\hline \text { Dr } & \text { Cash } & 925000 & \
\hline \mathrm { Dr } & \text { Loss on share portfolio } & 75000 & \
\hline \mathrm { Cr } & \text { Share portfolio } & & 1000000 \
\hline & & & \
\hline \mathrm { Dr } & \text { Deposit held by broker } & 30000 & \
\hline \mathrm { Cr } & \text { Cash at bank } & & 30000 \
\hline & & & \
\hline \mathrm { Dr } & \text { Futures payable } & 1340000 & \
\hline \mathrm { Cr } & \text { Deposit on futures contract } & & 166250 \
\hline \mathrm { Cr } & \text { Futures receivable } & & 1173750 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | l | r | r | } 
\hline \text { Dr } & \text { Cash } & 925000 & \
\hline \mathrm { Cr } & \text { Share portfolio } & & 925000 \
\hline & & & \
\hline \mathrm { Dr } & \text { Deposit held by broker } & 30000 & \
\hline \mathrm { Cr } & \text { Gain on futures contract } & & 30000 \
\hline & & & \
\hline \mathrm { Dr } & \text { Cash at bank } & 166250 & \
\hline \mathrm { Cr } & \text { Deposit held by broker } & & 166250 \
\hline & & & \
\hline \mathrm { Dr } & \text { Futures payable } & 1340000 & \
\hline \mathrm { Cr } & \text { Gain on futures contract } & & 166250 \
\hline \mathrm { Cr } & \text { Futures receivable } & & 1173750 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | r | r | } 
\hline \text { Dr } & \text { Cash } & 925000 & \
\hline \text { Dr } & \text { Loss on share portfolio } & 75000 & \
\hline \mathrm { Cr } & \text { Share portfolio } & & 1000000 \
\hline & & & \
\hline \text { Dr } & \text { Deposit on futures contract } & 30000 & \
\hline \mathrm { Cr } & \text { Gain on futures contract } & & 30000 \
\hline & & & \
\hline \mathrm { Dr } & \text { Cash at bank } & 166250 & \
\hline \mathrm { Cr } & \text { Deposit on futures contract } & & 166250 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | r | l | } 
\hline \text { Dr } & \text { Cash } & 925000 & \
\hline \text { Dr } & \text { Loss on share portfolio } & 25000 & \
\hline \mathrm { Cr } & \text { Share portfolio } & & 950000 \
\hline & & & \
\hline \text { Dr } & \text { Deposit held by broker } & 30000 & \
\hline \mathrm { Cr } & \text { Gains on futures contract } & & 30000 \
\hline & & & \
\hline \text { Dr } & \text { Cash at bank } & 166250 & \
\hline \mathrm { Cr } & \text { Deposit held by broker } & & 166250 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | r | r | } 
\hline \text { Dr } & \text { Cash } & 925000 & \
\hline \mathrm { Dr } & \text { Loss on share portfolio } & 75000 & \
\hline \mathrm { Cr } & \text { Share portfolio } & & 1000000 \
\hline & & & \
\hline \mathrm { Dr } & \text { Deposit held by broker } & 30000 & \
\hline \mathrm { Cr } & \text { Cash at bank } & & 30000 \
\hline & & & \
\hline \mathrm { Dr } & \text { Futures payable } & 1340000 & \
\hline \mathrm { Cr } & \text { Deposit on futures contract } & & 166250 \
\hline \mathrm { Cr } & \text { Futures receivable } & & 1173750 \
\hline
\end{array}$$

Question 14

Documentation that constitutes a financial instrument as a hedging instrument must include:

Accepted Answer

A) how the entity will assess the effectiveness of the hedging instrument. 
B) the nature of the risk being hedged. 
C) the risk management objective and strategy. 
D) all of the given answers. 
A) how the entity will assess the effectiveness of the hedging instrument. 
B) the nature of the risk being hedged. 
C) the risk management objective and strategy. 
D) all of the given answers.

Question 15

A convertible note may be accurately described as:

Accepted Answer

A) a derivative financial instrument that affords the holder a stream of cash flows and benefits associated with being a shareholder but transfers the risk to the holders of the convertible options. 
B) a secondary financial instrument that from the perspective of the issuer contains a contractual obligation to deliver cash and a put option. 
C) a simple financial instrument that affords the holder access to a stream of cash flows in the form of either dividends or interest payments. 
D) a compound financial instrument that from the perspective of the issuer contains a contractual obligation to deliver cash and a call option. 
A) a derivative financial instrument that affords the holder a stream of cash flows and benefits associated with being a shareholder but transfers the risk to the holders of the convertible options. 
B) a secondary financial instrument that from the perspective of the issuer contains a contractual obligation to deliver cash and a put option. 
C) a simple financial instrument that affords the holder access to a stream of cash flows in the form of either dividends or interest payments. 
D) a compound financial instrument that from the perspective of the issuer contains a contractual obligation to deliver cash and a call option.

Question 16

Derivatives are sometimes called 'secondary' financial instruments.

Accepted Answer

A) True 
 B)False

Question 17

Derivative instruments generally result in a transfer of the underlying primary financial instrument on maturity of the contract.

Accepted Answer

A) True 
 B)False

Question 18

Identify which of the following financial instruments are required under IAS 39 Financial Instruments: Recognition and Measurement to be measured at amortised cost: $\begin{array}{|l|l|}
\hline \text { I } & \text { Loans receivable } \
\hline \text { II } & \text { Debentures } \
\hline \text { III } & \text { Investments in associates } \
\hline \text { IV } & \text { Debt portion of a convertible note } \
\hline V & \text { Unfavourable derivative instruments } \
\hline
\end{array}$

Accepted Answer

A) I, II and III 
B) I, II and IV 
C) II, III and IV 
D) II, IV and V 
A) I, II and III 
B) I, II and IV 
C) II, III and IV 
D) II, IV and V

Question 19

When initially recognising the liability and equity components of a compound financial instrument,gains and losses arise and must be recognised.

Accepted Answer

A) True 
 B)False

Question 20

Penitent Plc acquired a parcel of 10 000 call options in Remorse Company Plc on 1 May 2014.The price of the options was €0.50 each and they may be exercised any time over the next 3 years.The exercise price is €11.On Penitent Plc's balance date - 30 June 2014 - the company is still holding the options.The market price of the options at that time was €1.20 each and the price of Remorse Company's shares had risen to €19.What are the entries required to record the purchase of the options and the adjusting entry to mark the options to market in Penitent's books?

Accepted Answer

A)  $\begin{array}{l}
1 \text { May } 2014\
\begin{array}{|l|l|r|r|}
\hline \mathrm{Dr} & \text { Investment in share options } & 110000 & \
\hline \mathrm{Cr} & \text { Cash } & & 110000 \
\hline & & & \
\hline 30 \text { June } 2014 & & \
\hline \mathrm{Dr} & \text { Investment in share options } &  80000 \
\hline \mathrm{Cr} & \text { Profit on share options }&& 80000\
\hline  
\end{array}
\end{array}$ 
B)  $$\begin{array}{l}
1 \text { May } 2014\
\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Investment in share options } & 5000 & \
\hline \mathrm { Cr } & \text { Cash } & & 5000 \
\hline & & & \
\hline 30 \text { June } 2014 & & \
\hline \mathrm { Dr } & \text { Investment in share options } & 7000& \
\hline \mathrm { Cr } & \text { Profit on share options } & &7000 \
\hline
\end{array}
\end{array}$$ 
C)  $$\begin{array}{l}
1 \text { May } 2014\
\begin{array} { | c | l | c | c | } 
\hline \text { Dr } & \text { Accounts payable-Remorse Ltd } & 5000 & \
\hline \mathrm { Cr } & \text { Share options } & & 5000 \
\hline\
\hline  30 \text { June } 2014 & & \
\hline \mathrm { Dr } & \text { Cash } & 7000 & \
\hline \mathrm { Cr } & \text { Gain on share options } & &7000  \
\hline
\end{array}
\end{array}$$ 
D)  $$\begin{array}{l}
1 \text { May } 2014\
\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Investment in share options } & 5000 & \
\hline \mathrm { Cr } & \text { Cash } & & 5000 \
\hline & & & \
\hline 30 \text { June } 2014 & & \
\hline \mathrm { Dr } & \text { Investment in share options } & 80000 & \
\hline \mathrm { Cr } & \text { Profit on share options } & & 80000 \
\hline
\end{array}
\end{array}$$ 
A)  $\begin{array}{l}
1 \text { May } 2014\
\begin{array}{|l|l|r|r|}
\hline \mathrm{Dr} & \text { Investment in share options } & 110000 & \
\hline \mathrm{Cr} & \text { Cash } & & 110000 \
\hline & & & \
\hline 30 \text { June } 2014 & & \
\hline \mathrm{Dr} & \text { Investment in share options } &  80000 \
\hline \mathrm{Cr} & \text { Profit on share options }&& 80000\
\hline  
\end{array}
\end{array}$ 
B)  $$\begin{array}{l}
1 \text { May } 2014\
\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Investment in share options } & 5000 & \
\hline \mathrm { Cr } & \text { Cash } & & 5000 \
\hline & & & \
\hline 30 \text { June } 2014 & & \
\hline \mathrm { Dr } & \text { Investment in share options } & 7000& \
\hline \mathrm { Cr } & \text { Profit on share options } & &7000 \
\hline
\end{array}
\end{array}$$ 
C)  $$\begin{array}{l}
1 \text { May } 2014\
\begin{array} { | c | l | c | c | } 
\hline \text { Dr } & \text { Accounts payable-Remorse Ltd } & 5000 & \
\hline \mathrm { Cr } & \text { Share options } & & 5000 \
\hline\
\hline  30 \text { June } 2014 & & \
\hline \mathrm { Dr } & \text { Cash } & 7000 & \
\hline \mathrm { Cr } & \text { Gain on share options } & &7000  \
\hline
\end{array}
\end{array}$$ 
D)  $$\begin{array}{l}
1 \text { May } 2014\
\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Investment in share options } & 5000 & \
\hline \mathrm { Cr } & \text { Cash } & & 5000 \
\hline & & & \
\hline 30 \text { June } 2014 & & \
\hline \mathrm { Dr } & \text { Investment in share options } & 80000 & \
\hline \mathrm { Cr } & \text { Profit on share options } & & 80000 \
\hline
\end{array}
\end{array}$$

IFRS 7 imposes further detailed disclosure requirements for which of the following credit risks?

Under IAS 23,interest incurred on a financial instrument,is able to be capitalised as part of a qualifying asset.When this is done:

Companies may be motivated to enter into a foreign currency swap in order to hedge receivables held in the currency of the loan,the obligations of which they will undertake in the swap.

A change in classification of a financial instrument may occur as a result of 'revised probabilities' of,for example,conversion.

A derivative financial instrument is one which:

Which of the following financial instruments can underlie an option contract?

The structure of futures contracts as they are traded in future markets is best described in which of the following?

Discuss the economic effect of issuing a compound instrument.

Under IFRS 9,an entity is required to recognise a financial asset or liability on its statement of financial position when,and only when,it becomes a party to the contractual provisions of the instrument.

The classification of a preference share as an equity instrument or financial liability is:

Documentation that constitutes a financial instrument as a hedging instrument must include:

A convertible note may be accurately described as:

Derivatives are sometimes called 'secondary' financial instruments.

Derivative instruments generally result in a transfer of the underlying primary financial instrument on maturity of the contract.

When initially recognising the liability and equity components of a compound financial instrument,gains and losses arise and must be recognised.

An Overview of the International External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Financial Accounting

An Overview of Accounting for Assets

Depreciation of Property, Plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

An Overview of Accounting for Liabilities

Accounting for Leases

Share Capital, Reserves and Share Options Employee Bonus Schemes

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Income Taxes

The Statement of Cash Flows

Events Occurring After the Reporting Date

Related-Party Disclosures

Earnings Per Share

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues III: Accounting for Indirect Ownership Interest

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

Filters

Exam 12: Accounting for Financial Instruments

IFRS 7 imposes further detailed disclosure requirements for which of the following credit risks?

Under IAS 23,interest incurred on a financial instrument,is able to be capitalised as part of a qualifying asset.When this is done:

Companies may be motivated to enter into a foreign currency swap in order to hedge receivables held in the currency of the loan,the obligations of which they will undertake in the swap.

A change in classification of a financial instrument may occur as a result of 'revised probabilities' of,for example,conversion.

A derivative financial instrument is one which:

Which of the following financial instruments can underlie an option contract?

The structure of futures contracts as they are traded in future markets is best described in which of the following?

Discuss the economic effect of issuing a compound instrument.

Under IFRS 9,an entity is required to recognise a financial asset or liability on its statement of financial position when,and only when,it becomes a party to the contractual provisions of the instrument.

The classification of a preference share as an equity instrument or financial liability is:

Documentation that constitutes a financial instrument as a hedging instrument must include:

A convertible note may be accurately described as:

Derivatives are sometimes called 'secondary' financial instruments.

Derivative instruments generally result in a transfer of the underlying primary financial instrument on maturity of the contract.

When initially recognising the liability and equity components of a compound financial instrument,gains and losses arise and must be recognised.

An Overview of the International External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Financial Accounting

An Overview of Accounting for Assets

Depreciation of Property, Plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

An Overview of Accounting for Liabilities

Accounting for Leases

Share Capital, Reserves and Share Options Employee Bonus Schemes

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Income Taxes

The Statement of Cash Flows

Events Occurring After the Reporting Date

Related-Party Disclosures

Earnings Per Share

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues III: Accounting for Indirect Ownership Interest

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

Filters