Exam 11: Financial Instruments

All of the following would be regarded as financial instruments except:

Company A issued convertible notes 3 years ago and accounted for them as a compound financial instrument. Complete the following: At the end of the three year period the portion of the XXX component that relates to the notes which have been converted XXX.

The formal documentation of a hedging relationship must include identification of:

The appropriate accounting treatment for incremental costs directly attributable to an equity transaction that would otherwise have been avoided is to:

Company A has convertible notes on issue. These notes are convertible to ordinary shares of the Company after 3 years. The distributions made to the note holders by Company A are classified by Company A as follows:

A financial asset classified as fair value through profit or loss (FVTPL) must be: I - A derivative that is a financial guarantee contract or a hedging instrument. II - Acquired principally for the purpose of selling it in the near term. III - Part of a portfolio of identified instrument that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. IV - Designated as such upon initial recognition.

When an entity has a legally enforceable right to set off the recognised amounts of a financial asset and financial liability and it intends to settle on a net basis, it:

Which of the following are regarded as financial instruments: I - Deposits held by a financial institution. II - Ordinary shares. III - Raw materials inventories. IV - Property, plant and equipment. V - Accounts receivable and accounts payable.

The classification of a financial instrument on the statement of financial position of an entity is governed by the principle of:

Which of the following categories of financial instruments is NOT subsequently measured at amortised cost?

A financial liability classified as fair value through profit or loss must be: I - A derivative (except for a derivative that is a financial guarantee contract or a hedging instrument). II - Acquired principally for the purpose of selling it in the near term. III - Part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. IV - Designated as such upon initial recognition.

AASB 139 Financial Instruments: Recognition and Measurement, requires that 'held-to-maturity' investments be initially measured at:

Which of the following is excluded from the scope of AASB 139?

Which of the following is NOT an example of a derivative financial instrument?

Which of the following events provide objective evidence that a financial asset has been Impaired: I - A default in interest payments. II - The borrower enters into bankruptcy. III - Significant financial difficulty of the issuer. IV - The downgrade of an entity's credit rating.

The definition of a derivative requires which of the following characteristics to be met? I - Its value must change in response to a change in an underlying variable such as a specified interest rate, price or foreign exchange rate. II - It must be settled on a net basis. III - It must require no initial net investment or an additional net investment that is smaller than would be required for other types of contracts with similar responses to changes in market factors. IV - It is to be settled at a future date.

Callas Corporation Limited buys an option that entitles it to purchase 2000 shares in Maria Limited at $5 per share at any time in the next 3 months. The derivative financial instrument in this transaction is the:

Company A issues preference shares to Company B, the terms of which entitle party B to redeem the preference shares for cash if Company A's revenues fall below a specified level. From Company A's perspective the preference shares are:

Which of the following is within the scope of AASB 139?

The risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss is referred to as: