PFRS 7

Question 1

The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

Answer 1

Currency risk

Question 2

The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Answer 2

Interest rate risk

Question 3

The risk that an entity will encounter difficulty in meeting obligations associated with that are settled by delivering or another.

Answer 3

Liquidity risk

Question 4

financial liabilities, other than short-term trade payables on normal credit terms.

Answer 4

Loans payable

Question 5

The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.

Answer 5

Market risk

Question 6

Market risk comprises three types of risk:

Answer 6

Currency risk
Interest rate risk
Other price risk

Question 7

The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer or by factors affecting all similar financial instruments traded in the market.

Answer 7

Other price risk

Question 8

Financial asset becomes ______________ when a counterparty has failed to make a payment when contractually due.

Answer 8

Past due

Question 9

The IFRS requires disclosure of:

Answer 9

(a) the significance of financial instruments for an entity’s financial position and performance.
(B) qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk.

Question 10

describe management’s objectives, policies and processes for managing those risks.

Answer 10

qualitative disclosures

Question 11

provide information about the extent to which the entity is exposed to risk, based on information provided internally to the entity’s key management personnel.

Answer 11

quantitative disclosures

Question 12

The objective of this IFRS is to require entities to provide disclosures in their financial statements that enable users to evaluate:

Answer 12

(a) the significance of financial instruments for the entity’s financial position and performance; and
(b) the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the end of the reporting period, and how the entity manages those risks.

Question 13

This IFRS shall be applied to all financial instrument except:

Answer 13

A) those interests in subsidiaries, associates or joint ventures that are accounted for in accordance with IFRS 10 Consolidated Financial Statements, IAS 27 Separate Financial Statements or IAS 28 Investments in Associates and Joint Ventures.
B) employers’ rights and obligations arising from employee benefit plans, to which IAS 19 Employee Benefits applies.
C) insurance contracts as defined in IFRS 4 Insurance Contracts.
D) financial instruments, contracts and obligations under share-based payment transactions to which IFRS 2 Share-based Payment applies, except that this IFRS applies to contracts within the scope of IFRS 9.
E) instruments that are required to be classified as equity instruments in accordance with paragraphs 16A and 16B or paragraphs 16C and 16D of IAS 32.

Question 14

Categories of financial assets and financial liabilities

Answer 14

A) financial assets measured at fair value through profit or loss, showing separately (i) those designated as such upon initial recognition and (ii) those mandatorily measured at fair value in accordance with IFRS 9.
B) financial liabilities at fair value through profit or loss, showing separately (i) those designated as such upon initial recognition and (ii) those that meet the definition of held for trading in IFRS 9.
C) financial assets measured at amortised cost.
D) financial liabilities measured at amortised cost.
E) financial assets measured at fair value through other comprehensive income.

Question 15

The risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.

Answer 15

Credit risk

Question 16

When this IFRS requires disclosures by class of financial instrument, an entity shall group financial instruments into _________ that are appropriate to the _____________________ disclosed and that take into account the ___________ of those financial instruments.

Answer 16

classes ; nature of the information; characteristics

Question 17

Categories of financial assets and financial liabilities

Answer 17

A) financial assets measured at fair value through profit or loss, showing separately (i) those designated as such upon initial recognition and (ii) those mandatorily measured at fair value in accordance with IFRS 9.
B) financial liabilities at fair value through profit or loss, showing separately (i) those designated as such upon initial recognition and (ii) those that meet the definition of held for trading in IFRS 9.
C) financial assets measured at amortised cost.
D) financial liabilities measured at amortised cost.
E) financial assets measured at fair value through other comprehensive income.

Question 18

Financial assets or financial liabilities at fair value through profit or loss
If the entity has designated as measured at fair value a financial asset (or group of financial assets) that would otherwise be measured at amortised cost, it shall disclose:

Answer 18

A) the maximum exposure to credit risk (see paragraph 36(a)) of the financial asset (or group of financial assets) at the end of the reporting period.
B)the amount by which any related credit derivatives or similar instruments mitigate that maximum exposure to credit risk.

Question 19

If the entity has designated a financial liability as at fair value through profit or loss in accordance with paragraph 4.2.2 of IFRS 9 and is required to present the effects of changes in that liability’s credit risk in other comprehensive income (see paragraph 5.7.7 of IFRS 9), it shall disclose:

Answer 19

A) the amount of change, cumulatively, in the fair value of the financial liability that is attributable to changes in the credit risk of that liability
B) the difference between the financial liability’s carrying amount and the amount the entity would be contractually required to pay at maturity to the holder of the obligation.
C) any transfers of the cumulative gain or loss within equity during the period including the reason for such transfers.

Question 20

If an entity has designated a financial liability as at fair value through profit or loss in accordance with paragraph 4.2.2 of IFRS 9 and is required to present all changes in the fair value of that liability (including the effects of changes in the credit risk of the liability) in profit or loss (see paragraphs 5.7.7 and 5.7.8 of IFRS 9), it shall disclose:

Answer 20

A) the amount of change, during the period and cumulatively, in the fair value of the financial liability that is attributable to changes in the credit risk of that liability
B)and the difference between the financial liability’s carrying amount and the amount the entity would be contractually required to pay at maturity to the holder of the obligation.

Question 21

Financial assets measured at fair value through other comprehensive income
If an entity has designated investments in equity instruments to be measured at fair value through other comprehensive income, as permitted by paragraph 5.7.5 of IFRS 9, it shall disclose:

Answer 21

A) which investments in equity instruments have been designated to be measured at fair value through other comprehensive income.
B) the reasons for using this presentation alternative.
C) the fair value of each such investment at the end of the reporting period.
D) dividends recognised during the period, showing separately those related to investments derecognised during the reporting period and those related to investments held at the end of the reporting period.
E) any transfers of the cumulative gain or loss within equity during the period including the reason for such transfers.

Question 22

If an entity derecognised investments in equity instruments measured at fair value through other comprehensive income during the reporting period, it shall disclose: (

Answer 22

A) the reasons for disposing of the investments.
B) the fair value of the investments at the date of derecognition.
C)the cumulative gain or loss on disposal.

Question 23

An entity shall disclose if, in the current or previous reporting periods, it has reclassified any financial assets in accordance with paragraph 4.4.1 of IFRS 9. For each such event, an entity shall disclose:

Answer 23

A) the date of reclassification.
B) a detailed explanation of the change in business model and a qualitative description of its effect on the entity’s financial statements.
C) the amount reclassified into and out of each category.

Question 24

Offsetting financial assets and financial liabilities disclosures

Answer 24

A) the gross amounts of those recognised financial assets and recognised financial liabilities;
B) the amounts that are set off in accordance with the criteria in paragraph 42 of IAS 32 when determining the net amounts presented in the statement of financial position;
C) the net amounts presented in the statement of financial position;

Question 25

In Collateral, an entity shall disclose:

Answer 25

A) the carrying amount of financial assets it has pledged as collateral for liabilities or contingent liabilities, including amounts that have been reclassified in accordance with IFRS 9 B) and the terms and conditions relating to its pledge.

Question 26

When an entity holds collateral (of financial or non-financial assets) and is permitted to sell or repledge the collateral in the absence of default by the owner of the collateral, it shall disclose:

Answer 26

A) the fair value of the collateral held; B) the fair value of any such collateral sold or repledged, and whether the entity has an obligation to return it; C) and the terms and conditions associated with its use of the collateral.

Question 27

For loans payable recognised at the end of the reporting period, an entity shall disclose:

Answer 27

A) details of any defaults during the period of principal, interest, sinking fund, or redemption terms of those loans payable; B) the carrying amount of the loans payable in default at the end of the reporting period; C) and whether the default was remedied, or the terms of the loans payable were renegotiated, before the financial statements were authorised for issue.

Question 28

Items of income, expense, gains or losses An entity shall disclose the following items of income, expense, gains or losses either in the statement of comprehensive income or in the notes:

Answer 28

A) net gains or net losses on: - financial assets or financial liabilities measured at fair value through profit or loss, showing separately those on financial assets or financial liabilities designated as such upon initial recognition, and those on financial assets or financial liabilities that are mandatorily measured at fair value in accordance with IFRS 9 -financial liabilities designated as at fair value through profit or loss, an entity shall show separately the amount of gain or loss recognised in other comprehensive income and the amount recognised in profit or loss. -financial liabilities measured at amortised cost. -financial assets measured at amortised cost. -financial assets measured at fair value through other comprehensive income. B) total interest income and total interest expense for financial assets that are measured at amortised cost or financial liabilities not at fair value through profit or loss. C) interest income on impaired financial assets accrued in accordance with IAS 39 D) amount of any impairment loss for each class of financial asset.

Question 29

the measurement basis (or bases) used in preparing the financial statements and the other accounting policies used that are relevant to an understanding of the financial statements is disclosed in

Answer 29

summary of significant accounting policies,

Question 30

An entity shall disclose the following separately for each type of hedge described in IAS 39 (ie fair value hedges, cash flow hedges, and hedges of net investments in foreign operations):

Answer 30

A) a description of each type of hedge; B) a description of the financial instruments designated as hedging instruments and their fair values at the end of the reporting period; C)and the nature of the risks being hedged.

Question 31

For cash flow hedges, an entity shall disclose:

Answer 31

A) the periods when the cash flows are expected to occur and when they are expected to affect profit or loss; B) a description of any forecast transaction for which hedge accounting had previously been used, but which is no longer expected to occur;

Question 32

Disclosures of fair value are not required:

Answer 32

A) when the carrying amount is a reasonable approximation of fair value B) for a contract containing a discretionary participation feature (as described in IFRS 4) if the fair value of that feature cannot be measured reliably.

Question 33

Qualitative disclosures For each type of risk arising from financial instruments, an entity shall disclose:

Answer 33

A) the exposures to risk and how they arise; B) its objectives, policies and processes for managing the risk and the methods used to measure the risk; C) and any changes in (a) or (b) from the previous period.

Question 34

Quantitative Disclosures | For each type of risk arising from financial instruments, an entity shall disclose:

Answer 34

A) summary quantitative data about its exposure to that risk at the end of the reporting period. This disclosure shall be based on the information provided internally to key management personnel of the entity (as defined in IAS 24 Related Party Disclosures), for example the entity’s board of directors or chief executive officer. B) the disclosures required by paragraphs 36–42, to the extent not provided in accordance with (a) C) concentrations of risk if not apparent from the disclosures made in accordance with (a) and (b).

Question 35

Credit risk An entity shall disclose by class of financial instrument:

Answer 35

A) the amount that best represents its maximum exposure to credit risk at the end of the reporting period B) a description of collateral held as security and other credit enhancements, and their financial effect C) information about the credit quality of financial assets that are neither past due nor impaired.

Question 36

Liquidity risk An entity shall disclose:

Answer 36

A) a maturity analysis for non-derivative financial liabilities (including issued financial guarantee contracts) that shows the remaining contractual maturities. B) a maturity analysis for derivative financial liabilities including the remaining contractual maturities for those derivative financial liabilities for which contractual maturities are essential for an understanding of the timing of the cash flows C) a description of how it manages the liquidity risk inherent in (a) and (b).

Question 37

Sensitivity analysis Unless an entity complies with paragraph 41, it shall disclose:

Answer 37

A) a sensitivity analysis for each type of market risk to which the entity is exposed at the end of the reporting period, showing how profit or loss and equity would have been affected by changes in the relevant risk variable that were reasonably possible at that date; B) the methods and assumptions used in preparing the sensitivity analysis; and C) changes from the previous period in the methods and assumptions used, and the reasons for such changes

Question 38

an entity transfers all or a part of a financial asset (the transferred financial asset) if, and only if, it either:

Answer 38

A) transfers the contractual rights to receive the cash flows of that financial asset B) asset, but assumes a contractual obligation to pay the cash flows to one or more recipients in an arrangement.

Question 39

the following do not constitute continuing involvement:

Answer 39

A) normal representations and warranties relating to fraudulent transfer and concepts of reasonableness, good faith and fair dealings that could invalidate a transfer as a result of legal action; B) forward, option and other contracts to reacquire the transferred financial asset for which the contract price (or exercise price) is the fair value of the transferred financial asset;

Question 40

To meet the objectives set out in paragraph 42B(a), the entity shall disclose at each reporting date for each class of transferred financial assets that are not derecognised in their entirety:

Answer 40

A) the nature of the transferred assets. | B) the nature of the risks and rewards of ownership to which the entity is exposed.

Question 41

To meet the objectives set out in paragraph 42B(b), when an entity derecognises transferred financial assets in their entirety but has continuing involvement in them, the entity shall disclose, as a minimum, for each type of continuing involvement at each reporting date:

Answer 41

A) the carrying amount of the assets and liabilities that are recognised in the entity’s statement of financial position and represent the entity’s continuing involvement in the derecognised financial assets, and the line items in which the carrying amount of those assets and liabilities are recognised B) the fair value of the assets and liabilities that represent the entity’s continuing involvement in the derecognised financial assets.

Question 42

In determining classes of financial instrument, an entity shall, at a minimum:

Answer 42

``` A) distinguish instruments measured at amortised cost from those measured at fair value. B) treat as a separate class or classes those financial instruments outside the scope of this IFRS. ```

Question 43

arise from financial instruments that have similar characteristics and are affected similarly by changes in economic or other conditions.

Answer 43

Concentration of risk

Question 44

Disclosure of concentrations of risk shall include:

Answer 44

A) a description of how management determines concentrations; B) a description of the shared characteristic that identifies each concentration (eg counterparty, geographical area, currency or market); C) and the amount of the risk exposure associated with all financial instruments sharing that characteristic.

Question 45

Activities that give rise to credit risk and the associated maximum exposure to credit risk include, but are not limited to:

Answer 45

a) granting loans to customers and placing deposits with other entities. (b) entering into derivative contracts, eg foreign exchange contracts, interest rate swaps and credit derivatives. C) granting financial guarantees. D) making a loan commitment that is irrevocable over the life of the facility or is revocable only in response to a material adverse change.