F4 - M1 - Financial Instruments

Question 1

Financial assets include cash, ownership interests (stocks, partnerships, LLCs), ________________, or exchanges such as derivatives contracts with potentially favorable terms.

Answer 1

rights to receive cash or financial instruments

Question 2

_________ represent obligations to deliver cash or other financial instruments or exchanges (including derivatives contracts) with potentially unfavorable terms.

Answer 2

Financial liabilities

Question 3

_________ include cash, ownership interests (stocks, partnerships, LLCs), rights to receive cash or financial instruments, or exchanges such as derivatives contracts with potentially favorable terms.

Answer 3

Financial assets

Question 4

__________ include investments such as bonds, government securities, commercial paper, redeemable preferred stock, and convertible debt.

Answer 4

Debt securities

Question 5

Under U.S. GAAP, there are three debt securities portfolio classifications: (3)

Answer 5

trading, available-for-sale, and held-to-maturity.

Question 6

_______Securities are intended for active trading

Answer 6

Trading securities

Question 7

Trading securities are intended for active trading. The portfolio itself is carried at ______ and is reported at __________ in the financial statements through the use of a valuation account.

Answer 7

cost; fair value

Question 8

For Trading Securities record Unrealized gains or losses are reported on _________.

Answer 8

the income statement

Question 9

_____ securities are carried at cost and are reported at fair value in the financial statements through the use of a valuation account.

Answer 9

Available-for-sale (AFS)

Question 10

Available-for-sale (AFS) securities are carried at ____ and are reported at _____ in the financial statements through the use of a valuation account.

Answer 10

cost; fair value

Question 11

_______ should be reported for the amount by which amortized cost exceeds fair value, with any remaining unrealized loss or any unrealized gains to be reported in other comprehensive income (the “U” in the PUFIER mnemonic).

Answer 11

A credit loss

Question 12

A credit loss should be reported for the amount by which ______ exceeds ______, with any remaining unrealized loss or any unrealized gains to be reported in other comprehensive income (the “U” in the PUFIER mnemonic).

Answer 12

amortized cost; fair value

Question 13

For Available for sale securities, unrealized loss and any unrealized gains are included in ________

Answer 13

OCI

Question 14

________ securities are appropriate when the investor has the ability and intent to hold to maturity

Answer 14

Held-to-maturity (HTM)

Question 15

HTM securities are reported in the financial statements at ________.

Answer 15

amortized cost.

Question 16

If it is probable that all amounts due (principal and interest) will not be collected, the investment should be reported at the _______ of the principal and interest expected to be collected. A credit loss (equal to the difference between amortized cost and present value of expected collections) and allowance must be recognized.

Answer 16

present value

Question 17

A ______ (equal to the difference between amortized cost and present value of expected collections) and allowance must be recognized.

Answer 17

credit loss

Question 18

For HTM - A credit loss (equal to the difference between _______ and _________) and allowance must be recognized.

Answer 18

amortized cost; present value of expected collections

Question 19

Realized gains/losses are recognized in net income when a debt security is sold and _____and ______ securities are impaired (per the rules above).

Answer 19

HTM, AFS

Question 20

_________ include investments such as common and preferred stock, rights to acquire shares of stock (warrants, stock rights, call options), and rights to dispose of shares of stock (put options).

Answer 20

Equity securities

Question 21

Equity securities are typically carried at ______ through net income (FVTNI), with unrealized gains/losses included in _______.

Answer 21

fair value; income statement

Question 22

For equity investments that do not have a readily determinable fair value, the practicability exception allows an entity to measure an investment at ____, plus/minus _________________ changes of identical or similar investments, less ________.

Answer 22

cost; plus/minus observable price changes of identical or similar investment, less impairments

Question 23

Realized gains/losses equal to the______ relative to the ______ are booked on the ___________.

Answer 23

sale price; adjusted cost; income statement

Question 24

For disclosures, Under U.S. GAAP, entities must disclose _____________, whether from a single party or a group of parties engaged in similar activities and that have similar economic characteristics

Answer 24

1) concentrations of credit risk arising from all financial instruments,

Question 25

This disclosure is required by all firms except “small” private firms (________ < __________).

Answer 25

assets; $100 million and no derivatives

Question 26

For equity investments ___________ of financial instruments is encouraged but not required under U.S. GAAP.

Answer 26

Market risk disclosure

Question 27

Under IFRS 9, financial assets and financial liabilities are initially recognized at ______ and then subsequently measured at either ____________.

Answer 27

fair value; amortized cost or fair value

Question 28

To recognize impairment, IFRS 9 requires a _______________ known as the expected credit loss model.

Answer 28

forward-looking impairment

Question 29

To recognize impairment, IFRS 9 requires a forward-looking impairment model known as the ___________.

Answer 29

expected credit loss model.