Week 5 Learning Resource

Question 1

When management purchase a financial instrument, they must classify in which three categorizes

Answer 1

1) Fair value through net income (FVNI)
2) Fair value through other comprehensive income (FVOCI)
3) amortized cost and cost

Question 2

Fair value through net income

Answer 2

use to classify shares of a public company that are held for trading. these shares are revalued to fair market value at the end of each reporting period, with unrealized gain/loss flow to net income.

Question 3

FVNI - initial recognition

Answer 3

IFDS - cost (FMV at the time)

ASPE - cost (FMV at the time)

Question 4

FVNI - direct cost of acquisition

Answer 4

IFDS/ASPE - expense immediately

Question 5

FVNI - Dividend received

Answer 5

Investment income

Question 6

FVNI - mark to FMV

Answer 6

IFDS/ASPE - yes every reporting period

Question 7

FVNI - classification of unrealized gain/loss

Answer 7

IFDS/ASPE - net income

Question 8

FVNI - Gain/loss on disposal

Answer 8

IFDS/ASPE - selling price less net book value

Question 9

fair value through other comprehensive income (FVOCI)

Answer 9

classify shares from public company that are available for sale.

This method is not applicable to ASPE, only IFDS

Question 10

FVOCI - initial recognition

Answer 10

IFDS - record at cost

Question 11

FVOCI - direct cost of acquisition

Answer 11

IFDS - add to cost

Question 12

FVOCI - dividend received

Answer 12

IFDS - investment income

Question 13

FVOCI - mark to fair market value

Answer 13

IFDS - yes, every reporting period

Question 14

FVOCI - classification of unrealized gain/loss

Answer 14

IFDS - other comprehensive income (OCI)

Question 15

FVOCI - gain/loss on disposal

Answer 15

IFDS - selling price less net book value. gain/loss sitting in OCI will be recycle to net income when sold

Question 16

Amortized cost and cost

Answer 16

used for variety of financial instruments. can be used for long-term debt(bonds) that are held to maturity, loans and receivables, equity investment which FMV can’t be obtained

Question 17

Cost - initial recognition

Answer 17

IFDS/ASPE - cost (FMV at the time of purchase)

Question 18

Cost - direct costs of acquisition

Answer 18

IFDS/ASPE - add to cost

Question 19

Cost - Dividends/interest received

Answer 19

IFDS/ASPE - Investment income

Question 20

Cost - mark to FMV

Answer 20

IFDS/ASPE - no - unless permanently impaired

Question 21

Cost- Classification of unrealized gain/losses

Answer 21

N/A

Question 22

Cost - gain/loss on disposal

Answer 22

selling price less net book value