Intercorporate Investments Flashcards
What is the primary purpose of IFRS 9?
To establish principles for the financial reporting of financial instruments.
True or False: IFRS 9 requires that all financial instruments be measured at amortized cost.
False
Fill in the blank: Under IFRS 9, intercompany investments are typically classified as _____ or _____ based on the business model.
amortized cost, fair value
What are the three main classification categories for financial assets under IFRS 9?
Amortized cost, fair value through profit or loss, fair value through other comprehensive income.
Which IFRS standard replaced IAS 39?
IFRS 9
What is the significance of the ‘business model’ in classifying financial instruments under IFRS 9?
It determines how an entity manages its financial assets to generate cash flows.
True or False: Under IFRS 9, equity instruments are always measured at fair value.
True
What method is used to assess impairment of financial assets under IFRS 9?
Expected credit loss model
Multiple Choice: Which of the following is NOT a characteristic of a financial asset under IFRS 9? A) Contractual rights to receive cash B) Equity investments C) Intangible assets
C) Intangible assets
What is the treatment of intercompany loans under IFRS 9?
They are measured at amortized cost unless designated at fair value.
Fill in the blank: Under IFRS 9, an entity must recognize _____ on financial assets at the time of initial recognition.
expected credit losses
True or False: Under IFRS 9, an entity can choose to classify a financial asset as fair value through profit or loss at any time.
False
What is the main purpose of the fair value option under IFRS 9?
To eliminate an accounting mismatch.
Multiple Choice: Which of the following is considered a financial liability under IFRS 9? A) Accounts payable B) Goodwill C) Inventory
A) Accounts payable
What is the impact of IFRS 9 on the recognition of intercompany investments?
It requires that investments in subsidiaries, associates, and joint ventures be accounted for based on the applicable financial reporting framework.
Fill in the blank: The impairment model under IFRS 9 is based on the concept of _____ credit losses.
expected
True or False: Under IFRS 9, changes in the fair value of equity instruments are recognized in profit or loss.
False
What does the term ‘recognition’ refer to in the context of IFRS 9?
The process of recording an item in the financial statements.
Multiple Choice: Which of the following is NOT a factor in determining the classification of financial assets under IFRS 9? A) Business model B) Contractual cash flow characteristics C) Market share of the company
C) Market share of the company
What is the primary focus of the fair value through other comprehensive income category?
To reflect changes in fair value while not impacting profit or loss.
Fill in the blank: Under IFRS 9, financial liabilities are generally measured at _____ or _____.
amortized cost, fair value
True or False: The expected credit loss model applies to all financial assets under IFRS 9.
True
What does IFRS 9 require regarding the disclosure of financial instruments?
Entities must disclose the nature and extent of risks arising from financial instruments.
Multiple Choice: Which of the following is a key feature of the expected credit loss model? A) It is based on historical loss data B) It uses a forward-looking approach C) It only applies to corporate bonds
B) It uses a forward-looking approach
