Question 1

In measuring an equity instrument at fair value the objective is to estimate an exit price at measurement date from the perspective of:

Accepted Answer

A)  the issuer of the equity instrument; 
B)  the party to whom the instrument will be transferred; 
C)  the party who intends to repurchase the instrument; 
D)  a market participant who holds the instrument as an asset. 
A)  the issuer of the equity instrument; 
B)  the party to whom the instrument will be transferred; 
C)  the party who intends to repurchase the instrument; 
D)  a market participant who holds the instrument as an asset. D

Question 2

In which circumstance will it be necessary to determine the fair value of an entity's own equity instruments?

Accepted Answer

A)  where the entity is preparing for listing; 
B)  where the entity undertakes a business combination and issues its own equity instruments in exchange for a business; 
C)  where the entity undertakes a share buy-back; 
D)  where there is a change in the shareholding of the entity. 
A)  where the entity is preparing for listing; 
B)  where the entity undertakes a business combination and issues its own equity instruments in exchange for a business; 
C)  where the entity undertakes a share buy-back; 
D)  where there is a change in the shareholding of the entity. B

Question 3

Which of the following steps in not relevant when valuing liabilities?

Accepted Answer

A)  the particular liability that is the subject of the measurement; 
B)  the valuation premise that is appropriate for the measurement; 
C)  the principal (or most advantageous) market for the liability; 
D)  the valuation technique(s) appropriate for the measurement, considering the availability of data with which to develop inputs that represent the assumptions that market participants would use when pricing the asset or liability and the level of the fair value hierarchy within which the inputs are categorised. 
A)  the particular liability that is the subject of the measurement; 
B)  the valuation premise that is appropriate for the measurement; 
C)  the principal (or most advantageous) market for the liability; 
D)  the valuation technique(s) appropriate for the measurement, considering the availability of data with which to develop inputs that represent the assumptions that market participants would use when pricing the asset or liability and the level of the fair value hierarchy within which the inputs are categorised. B

Question 4

Which of the following does Whittington (2008) see as a main feature of the fair value view?

Accepted Answer

A)  Stewardship, defined as accountability to present shareholders, is a distinct objective, ranking equally with decision usefulness; 
B)  Reliability is less important and is better replaced by representational faithfulness, which implies a greater concern for capturing economic substance, and less with statistical accuracy; 
C)  Present shareholders of the holding company have a special status as users of financial statements; 
D)  Future cash flows may be endogenous: feedback from shareholders and markets in response to accounting reports may influence management decisions. 
A)  Stewardship, defined as accountability to present shareholders, is a distinct objective, ranking equally with decision usefulness; 
B)  Reliability is less important and is better replaced by representational faithfulness, which implies a greater concern for capturing economic substance, and less with statistical accuracy; 
C)  Present shareholders of the holding company have a special status as users of financial statements; 
D)  Future cash flows may be endogenous: feedback from shareholders and markets in response to accounting reports may influence management decisions.

Question 5

Unobservable inputs for the asset or liability are an example of:

Accepted Answer

A)  a Level 1 input; 
B)  a Level 2 input; 
C)  a Level 3 input; 
D)  a Level 4 input. 
A)  a Level 1 input; 
B)  a Level 2 input; 
C)  a Level 3 input; 
D)  a Level 4 input.

Question 6

Which of the following is an example of a liability where there is no corresponding asset?

Accepted Answer

A)  a provision for decommissioning; 
B)  a debenture issued by a listed company; 
C)  a loan owing to a financial institution; 
D)  a provision for warranties. 
A)  a provision for decommissioning; 
B)  a debenture issued by a listed company; 
C)  a loan owing to a financial institution; 
D)  a provision for warranties.

Question 7

Which of the following is the definition of exit price per IFRS 13?

Accepted Answer

A)  A transaction that assumes exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities; it is not a forced transaction (e.g. a forced liquidation or distress sale); 
B)  The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction; 
C)  The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; 
D)  The price that would be received to sell an asset or paid to transfer a liability. 
A)  A transaction that assumes exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities; it is not a forced transaction (e.g. a forced liquidation or distress sale); 
B)  The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction; 
C)  The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; 
D)  The price that would be received to sell an asset or paid to transfer a liability.

Question 8

Which of the following disclosures are not required under IFRS 13?

Accepted Answer

A)  the valuation techniques used to measure fair value; 
B)  the inputs used to measure fair value; 
C)  the level of the fair value hierarchy within which the fair value measurements are categorised; 
D)  quantitative information about all unobservable inputs used in the fair value measurement. 
A)  the valuation techniques used to measure fair value; 
B)  the inputs used to measure fair value; 
C)  the level of the fair value hierarchy within which the fair value measurements are categorised; 
D)  quantitative information about all unobservable inputs used in the fair value measurement.

Question 9

Trademarks would be measured primarily using which type of inputs?

Accepted Answer

A)  Level 1 inputs; 
B)  Level 2 inputs; 
C)  Level 3 inputs; 
D)  Level 4 inputs. 
A)  Level 1 inputs; 
B)  Level 2 inputs; 
C)  Level 3 inputs; 
D)  Level 4 inputs.

Question 10

When determining the fair value of an asset its fair value is based on its:

Accepted Answer

A)  Current use; 
B)  Proposed use; 
C)  Highest and best use; 
D)  Value in use. 
A)  Current use; 
B)  Proposed use; 
C)  Highest and best use; 
D)  Value in use.

Question 11

Non-performance risk refers to the risk that:

Accepted Answer

A)  a market participant will not fulfil an obligation; 
B)  the holder of the liability will not fulfil an obligation; 
C)  the counterparty will not fill an obligation; 
D)  the holder of a corresponding asset will not fulfil an obligation. 
A)  a market participant will not fulfil an obligation; 
B)  the holder of the liability will not fulfil an obligation; 
C)  the counterparty will not fill an obligation; 
D)  the holder of a corresponding asset will not fulfil an obligation.

Question 12

Which of the following is not an example of a level 2 input?

Accepted Answer

A)  a financial forecast of cash flow or earnings; 
B)  quoted prices for identical or similar assets or liabilities in markets that are not active; 
C)  inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves, volatilities, prepayment speeds, and credit risks; 
D)  inputs that are derived from or corroborated by observable market data by correlation or other means. 
A)  a financial forecast of cash flow or earnings; 
B)  quoted prices for identical or similar assets or liabilities in markets that are not active; 
C)  inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves, volatilities, prepayment speeds, and credit risks; 
D)  inputs that are derived from or corroborated by observable market data by correlation or other means.

Question 13

Where a market has both a bid and an ask process, the price used in measuring fair value is:

Accepted Answer

A)  the bid price; 
B)  the ask price; 
C)  the bid-ask spread; 
D)  the most representative price for the transaction. 
A)  the bid price; 
B)  the ask price; 
C)  the bid-ask spread; 
D)  the most representative price for the transaction.

Question 14

Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date are an example of:

Accepted Answer

A)  a Level 2 input; 
B)  a Level 1 input; 
C)  a Level 3 input; 
D)  a Level 4 input. 
A)  a Level 2 input; 
B)  a Level 1 input; 
C)  a Level 3 input; 
D)  a Level 4 input.

Question 15

Valuation techniques that convert future amounts to a single current amount and determines the fair value on the basis of the value indicated by current market expectations about those future amounts is an example of:

Accepted Answer

A)  the fair value approach; 
B)  the income approach; 
C)  the cost approach; 
D)  the market approach. 
A)  the fair value approach; 
B)  the income approach; 
C)  the cost approach; 
D)  the market approach.

Question 16

Which of the following is not a characteristic of a market participant under IFRS 13?

Accepted Answer

A)  Buyers and sellers that are able to enter into a transaction for the asset or liability; 
B)  Buyers and sellers that are willing to enter into a transaction for the asset or liability; 
C)  Buyers and sellers that are dependent on each other; 
D)  Buyers and sellers that are knowledgeable, having a reasonable understanding about the asset or liability and the transaction using all available information. 
A)  Buyers and sellers that are able to enter into a transaction for the asset or liability; 
B)  Buyers and sellers that are willing to enter into a transaction for the asset or liability; 
C)  Buyers and sellers that are dependent on each other; 
D)  Buyers and sellers that are knowledgeable, having a reasonable understanding about the asset or liability and the transaction using all available information.

Question 17

Which of the following is the definition of fair value per IFRS 13?

Accepted Answer

A)  The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction; 
B)  The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; 
C)  The price that would be received to sell an asset or paid to transfer a liability; 
D)  A transaction that assumes exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities; it is not a forced transaction (eg a forced liquidation or distress sale). 
A)  The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction; 
B)  The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; 
C)  The price that would be received to sell an asset or paid to transfer a liability; 
D)  A transaction that assumes exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities; it is not a forced transaction (eg a forced liquidation or distress sale).

Question 18

An entity holding both financial assets and liabilities is allowed to offset and determine fair value on the net position as long as: 
I they hold a net long position
II they hold a net short position
III they have a documented risk management strategy
IV the manage the group of net financial assets and liabilities on a net exposure basis
v. transactions are conducted in an orderly market

Accepted Answer

A)  I and III; 
B)  II and IV; 
C)  III and IV; 
D)  II and V. 
A)  I and III; 
B)  II and IV; 
C)  III and IV; 
D)  II and V.

Question 19

The market with the greatest volume and level of activity for the asset or liability is defined as the:

Accepted Answer

A)  active market; 
B)  principal market; 
C)  liquid market; 
D)  most advantageous market. 
A)  active market; 
B)  principal market; 
C)  liquid market; 
D)  most advantageous market.

Question 20

Where a liability is held as a corresponding asset by another entity the fair value of the liability is determined by:

Accepted Answer

A)  applying a present value technique to measure the liability; 
B)  applying the cost approach to valuing the liability; 
C)  measuring the fair value of the corresponding asset; 
D)  determining the amount required to settle the present obligation. 
A)  applying a present value technique to measure the liability; 
B)  applying the cost approach to valuing the liability; 
C)  measuring the fair value of the corresponding asset; 
D)  determining the amount required to settle the present obligation.

Exam 3: Fair Value Measurement

In measuring an equity instrument at fair value the objective is to estimate an exit price at measurement date from the perspective of:

In which circumstance will it be necessary to determine the fair value of an entity's own equity instruments?

Which of the following steps in not relevant when valuing liabilities?

Which of the following does Whittington (2008) see as a main feature of the fair value view?

Unobservable inputs for the asset or liability are an example of:

Which of the following is an example of a liability where there is no corresponding asset?

Which of the following is the definition of exit price per IFRS 13?

Which of the following disclosures are not required under IFRS 13?

Trademarks would be measured primarily using which type of inputs?

When determining the fair value of an asset its fair value is based on its:

Non-performance risk refers to the risk that:

Which of the following is not an example of a level 2 input?

Where a market has both a bid and an ask process, the price used in measuring fair value is:

Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date are an example of:

Valuation techniques that convert future amounts to a single current amount and determines the fair value on the basis of the value indicated by current market expectations about those future amounts is an example of:

Which of the following is not a characteristic of a market participant under IFRS 13?

Which of the following is the definition of fair value per IFRS 13?

The market with the greatest volume and level of activity for the asset or liability is defined as the:

Where a liability is held as a corresponding asset by another entity the fair value of the liability is determined by:

The Iasb and Its Conceptual Framework

Owners Equity: Share Capital and Reserves

Revenue From Contracts With Customers

Provisions, Contingent Liabilities and Contingent Assets

Financial Instruments

Share-Based Payment

Inventories

Employee Benefits

Leases

Impairment of Assets

Financial Statement Presentation

Statement of Cash Flows

Operating Segments

Other Key Notes Disclosures

Consolidation: Controlled Entities

Consolidation: Wholly Owned Subsidiaries

Consolidation: Intragroup Transactions

Translation of the Financial Statements of Foreign Entities

Agriculture

Associates and Joint Ventures

Joint Arrangements

Revenue From Contracts With Customers

Financial Instruments

Financial Instruments

Share-Based Payment

Exploration for and Evaluation of Mineral Resources

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