Chapter FAR 10-10: Financial Instruments Flashcards Preview

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Flashcards in Chapter FAR 10-10: Financial Instruments Deck (14):
1

IASB prouncement IFRS 9, what's this?

Financial assets and liabilities

at first are recorded at Fair value

then subsequently (later dates), re-measured at either amortized cost or fair value.

Note: Financial liabilities cannot be classifieds between amortized cost or Fair value.

2

US GAAP equivalent of IFRS 9, what is it?

US GAAP does not have one yet.

3

IFRS 9 approach on Debt instruments [Financial Assets]:

They can be reported at ___ ___ or ___ value

Amortized cost or Fair value

4

IFRS 9 on Debt instruments (Financial assets):

What are the conditions to measure debt instrument at amortized cost?

(1) Company has a business model to have an asset to collect Contractual cash flows

(2) Contract terms laid that here are the days when payments are coming in to the company.
And these payments are only for principal and interests.

5

IFRS 9 on Debt instruments (Financial assets):

What are the conditions to measure debt instrument at Fair Value?

When recognize debt instrument at fair value, gains and losses are recognized in ______ .

Measure debt at Fair value when

(1) Not meet conditions to use Amortized Cost measurement

OR

(2) Elects or decides on the first day of debt instrument to recognize/record Debt instrument @ Fair value

When recognize debt instrument at fair value, gains and losses are recognized in EARNINGS.

6

IFRS 9 on Equity instruments:

Equity instruments (financial assets) are reported at ___ value and Gains and losses are recognized in ____

Equity instruments (financial assets) are reported at FAIR value and Gains and losses are recognized in EARNINGS

7

IFRS 9 on Equity instruments:

When are equity instruments not reported at fair value (w/ gains and losses not reported in earnings)?

(1) Equity instrument is part of Hedging relationship

(2) Entity decides (irrevocably, can't change decision later) on 1st day of equity instrument to

Present Gains and losses in Other Comprehensive Income

8

IFRS 9 on Equity instruments:

When present equity instruments' gains and losses in OCI, then

Gains and loses are ____ recognized in _____, but may be reclassified within _____ .

Gains and loses are NEVER recognized in EARNINGS, but may be reclassified within EQUITY.

9

IFRS 9 on Debt Instruments and equity instruments (financial assets):

When you can reclassify financial assets between amortized costs and Fair value?

When change business model on how to manage the financial instruments

10

IFRS 9 on Debt Instruments and equity instruments (financial assets):

Changes to business model on managing financial instruments should be ____ and are accounted _____.

And the asset should be re-measured at ___ ____ at date of ____ with gains and losses recognized in ____ .

Changes to business model on managing financial instruments should be INFREQUENT and are accounted PROSPECTIVELY.

And the asset should be re-measured at FAIR VALUE at date of RECLASSIFICATION with gains and losses recognized in EARNINGS.

11

IFRS 9 on Financial liabilities:

Financial liabilities are subsequently measured at amortized cost using the ___ ____ method.

Financial liabilities are subsequently measured at amortized cost using the EFFECTIVE INTEREST method.

12

IFRS 9 on Financial Liabilities:

Fair value measurement:

Financial liabilities can be measured at Fair value at later periods in certain circumstances including:

When entity at initial recognition ____ designates a financial liability as measured at fair value through ___ and ____ .

When entity at initial recognition IRREVOCABLY designates a financial liability as measured at fair value through PROFIT or LOSS.

13

IFRS 9 on Financial Liabilities:

Fair value measured financial liabilities have gains and losses reported in _____, unless the entity is required to present the effects of changes in the liabilities' __ __ in other ___ ____.

Fair value measured financial liabilities have gains and losses reported in EARNINGS, unless the entity is required to present the effects of changes in the liabilities' CREDIT RISK in other COMPREHENSIVE INCOME.

14

IFRS 9 on financial liabilities

Reclassification

There are NO reclassification on financial liabilities between amortized cost or fair value.

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