IFRS 9: FINANCIAL INSTRUMENTS

TRUE OR FALSE:
1. Cash in the form of notes and coins forms part of the financial instrument.
2. There should be two or more parties to the contract in financial instruments.
3. An example of a favorable condition is an option held by the holder to purchase shares
of another entity of more than the market price.
4. An entity shall remove a financial liability from its statement of financial position when
financial liability is extinguished.
5. Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations
associated with financial liability.
6. One of the characteristics of financial assets is that there should be at most 2 parties to
the contract.
7. Cash in bank is a financial asset of the depositor and a financial liability of the depository
bank.
8. Financial assets are classified into two; namely: FA at fair value and FA at amortized cost
9. Held to maturity equities include both equity and debt securities.
10. A debt security is any security that represents a creditor relationship with an entity.
11. An impairment loss should be recognised if a trade receivable becomes wholly or partly
uncollectible.
12. Trade payables must always be measured at amortised cost using the effective interest
method.
13. Prices for long-term bonds are more volatile than for shorter-term bonds.
14. Increasing duration implies that interest-rate risk has increased.
15. The real interest rate is equal to the nominal rate minus inflation.
16. IFRS 9 Financial Instruments issued on 24 July 2014.
17. All financial instruments are initially measured at fair value plus or minus, in the case of a
financial asset or financial liability not at fair value through profit or loss, transaction
costs.
18. The contractual terms of the financial asset give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount outstanding.
19. All equity investments in scope of IFRS 9 are to be measured at fair value in the
statement of financial position, with value changes recognized in profit or loss, except for
those equity investments for which the entity has elected to present value changes in
'other comprehensive income'.
20. All derivatives in scope of IFRS 9, including those linked to unquoted equity investments,
are measured at fair value

MULTIPLE CHOICE:
1. The financial asset is any asset that is:
I.

Cash

II.

A contractual right to receive cash or another financial asset from another company

III.

A contractual right to exchange financial instruments with another entity under conditions
that are potentially favorable.

IV.

An equity instrument of another entity.

1. I & II only
2. I,II, & III
3. II, III & IV
4. All of the above
2. A preference share that provides for mandatory redemption on a specific date or at the
option of the holder is:
1. A financial Asset
2. An equity instrument
3. A financial liability
4. Neither nor a financial liability nor an equity instrument
3. Which of the following is not classified as a financial instrument?
A. Convertible bond
B. Warranty provision
C. Loan receivable
D. Foreign Currency Contract
4. If an asset subject to a call option can be readily obtained by the transferee in the market:
A. The asset or liability should be transferred to equity.
B. The transaction should be accounted for as a collateralised borrowing.
C. A financial asset (or part of a financial asset) or liability may not be derecognised.
D. The transferor has lost control

5.Control of an asset is based on:

A. Ownership.
B. Possession.
C. The transferees ability to sell the asset
6. It is any contract that gives rise to both a financial asset of one entity and a financial liability
A.
B.
C.
D.

or equity instrument of another entity.

Financial instrument
Equity instrument
Debt instrument
Derivative instrument

7.
A.
B.
C.
D.

Financial liabilities include all of the following except:

Trade notes payable
Notes payable
Bonds payable
Income taxes payable

8.
A.
B.
C.
D.

Which should be classified as financial instrument?

Patents
Trade receivables
Inventories
Land and Building

9.
A.
B.
C.
D.

Transaction cost that are directly attributable to the acquisition of a financial asset shall be:
Capitalized as cost to financial asset
Expensed when incurred
Charged to retained earnings
Included as a component of other comprehensive income

10. Depending on the business model for managing financial assets, an entity shall classify
A.
B.
C.
D.

financial assets subsequent to initial recognition at:

Fair value
Amortized cost
Either fair value or amortized cost
Neither fair value nor amortized cost

11.
a.
b.
c.
d.

A financial instrument is:

A type of contract
A type of asset
A type of liability
A type of asset or liability

12. The accounting principle applied by standard IAS32 when distinguishing between liabilities
and equity is:
a. Prudence
b. Neutrality

c. Substance over form

d. Consistency
13. Redeemable preference shares should be classified (from the issuing company's point of
a.
b.
c.
d.

view) as:
An equity instrument
A financial asset
A financial liability
A compound financial instrument

14. After initial recognition, held-to-maturity investments (e.g. loan stocks which the entity
a.
b.
c.
d.

holding the stocks intends to hold until maturity) should normally be measured at:
Fair value
Amortised cost
Original cost
Fair value or amortised cost

15. The amortised cost of a financial asset is equal to:

a. The amount at which the asset was originally recognised
b. The fair value of the asset
c.The amount at which the asset was originally recognised, plus interest earned to date
d. The amount at which the asset was originally recognised, plus interest earned to date, less
repayments received to date
16. IFRS 9 Financial Instruments issued on:
a. July 24, 2014
b. July 25, 2014
c.August 6, 2014
d. September 14, 2014
17. All financial instruments are initially measured at:
a. Cost
b. Fair value
c.Amortized Cost
d. Fair value plus or minus, in the case of a financial asset or financial liability not at fair value
through profit or loss, transaction costs
18. The hedge accounting requirements in IFRS 9 are:
a. Optional
b. Required
c.Disclosure only
d. None of the above
19. IFRS 9 requires that the same impairment model apply to all of the following except:
a. Financial assets measured at amortized cost
b. Lease Receivables
c.Accounts receivables
d. Contract assets

20. IFRS 9 does not allow reclassification:

a. for equity investments measured at FVTOCI,
b. where the fair value option has been exercised in any circumstance for a financial assets or
financial liability
c.Both a and b
None of the above
16.

IFRS 9 ANSWERS
21.
TRUE OR FALSE
1. T

MULTIPLE CHOICE:

2. F

1. D

3. F

2. C

4. T

3. C

5. T

4. D

6. F

5. C

7. T

6. A

8. T

7. D

9. F

8. B

10. T

9. A

11. T

10. C

12. F

11. A
12. C
13. C
14. B
15. D
16. A
17. D
18. A
19. C
20. C

13. T
14. T
15. T
16. T
17. T
18. T
19. T
20. T