Acctg for Transfers

Question 1

If a firm surrenders control over an entire asset, a sale has occurred. TF

Answer 1

True

Question 2

If a firm surrenders components of an asset not participating interest, a sale has occurred. TF

Answer 2

False, this would make it secured borrowing.

Question 3

If a firm surrenders components of an asset which are participating interest, a sale has occurred. TF

Answer 3

True`

Question 4

A servicing liability results when expected revenues > the expected costs of servicing, as reflected in FV. TF

Answer 4

False, servicing asset.

Question 5

A servicing asset results when expected revenues

Answer 5

False, servicing liability.

Question 6

When a servicing liability/asset has a carrying value less than FV an impairment loss is recognized. TF

Answer 6

True

Question 7

The servicing function is not inherent in all financial assets. TF

Answer 7

False, it is inherent in all.

Question 8

Expected gross profit = projected revs - total servicing cost. TF

Answer 8

True

Question 9

Debtors can write of liabilities as soon as they realize they cant pay them. TF

Answer 9

False, debtors can only write off debts if the debtor either pays the creditor and is relived of the obligation or by order of law/court.

Question 10

In substance defeasance is…

Answer 10

when a company places purchased securities in an irrevocable trust and pledges them for future principal and interest payments on its LT debt.

Question 11

IFRS: Financial assets are derecognized when 1: the asset has been transferred outside the transferors consolidated group and 2. the transferor has transferred substantially all risk and rewards of ownership. TF

Answer 11

True