FAR 4.1 - Financiaal Instruments

Question 1

Debt securities should be classified into one of three categories:

Answer 1

1. Trading securities
2. Available for sale securities
3. Held to maturity debt securities

Question 2

This type of debt security is valued at fair value and all gains and losses go on the income statement:

Answer 2

Trading securities

Question 3

This type of debt security is valued at fair value, and when sold realized gains are on the income statement and when unsold unrealized gains and losses go to other comprehensive income:

Answer 3

AFS securities

Question 4

This type of debt security is valued at a amortized cost

Answer 4

HTM securities

Question 5

Any transfer between debt security categories is accounted for at:

Answer 5

Fair value

Question 6

How are unrealized holding gains or loses on securities transferred to trading securities treated?

Answer 6

Recognized in urgent earnings

Question 7

How are unrealized holding gains or loses on securities transferred from trading securities treated?

Answer 7

They shave already been recognized so nothing is needed

Question 8

How are unrealized holding gains or loses on HTM securities transferred to AFS securities treated?

Answer 8

Recorded in other comprehensive income

Question 9

How are unrealized holding gains or loses on AFS securities transferred to HTM securities treated?

Answer 9

Amortized over the remaining life of the security

Question 10

How is expected credit loss calculated?

Answer 10

Present value - amortized cost

Question 11

A credit loss is recognized as aa current period expense and an offsetting:

Answer 11

Allowance

Question 12

If it is determined that all amounts due will not be collected on a debt investment reported at amortized cost the investment should be reported at:

Answer 12

The present value of the principal and interest that is expected to be collected

Question 13

A sale of a debt security from any category results in a:

Answer 13

Realized gain or loss recognized in net income

Question 14

How is the realized gain or loss calculated on the sale of a trading security?

Answer 14

Selling price - carrying value @ the time of sale

Question 15

How is the realized gain or loss calculated on the sale of an AFS security?

Answer 15

Selling price - original cost
And any unrealized gains or losses accumulated in OCI must be reversed

Question 16

Public equity securities are carried at:

Answer 16

Fair value through net income

Question 17

Non-public equity securities are carried at:

Answer 17

Cost - impairment +/- any observable price changes

Question 18

A distribution that exceeds the investors share of the investee’s retained earnings

Answer 18

Liquidating dividend