PFRS9

Question 1

initial recognition

Answer 1

financial assets and financial liabilities are recognized only when the entity becomes a party to the contractual provisions of the instruments

Question 1

establishes the financial reporting principles for financial assets and financial liabilities, particularly their classification and measurement

Answer 1

PFRS9

Question 2

Classification of financial assets

Answer 2

a. amortized cost
b. FVOCI
c. FVPL

Question 3

basis of classification

Answer 3

a. the entity’s business model for managing financial assets
b. the contractual cash flow characteristics of the financial asset

Question 4

classification of amortized cost

Answer 4

• hold to collect business model
• solely payments or principal and interest

Question 5

classification of FVOCI

Answer 5

• hold to collect and sell
• solely payments of principal and interest

Question 6

classification of FPVL

Answer 6

-held for trading

Question 7

exceptions

Answer 7

1. Investment in equity instrument at FVOCI (election)
2. option to designate a financial asset at FVPL (designated)

Question 8

the removal of a recognized asset or liability from an entity’s statement of financial position

Answer 8

derecognition

Question 9

evidences a residual interest in the net assets of an entity (e.g., shares of stock)

Answer 9

equity instrument

Question 10

represents debtor-creditor relationship (i.e., lending transaction) e.g., bonds

Answer 10

debt instrument

Question 11

refers to how an entity manages its financial assets in order to generate cash flow:
a. hold financial assets in order to collect the contractual cash flows over the life of the instrument (hold to collect)
b. hold financial assets to collect the contractual cash flows but also sell them to realize fair value gains whenever an opportunity arises (hold to collect and sell)

Answer 11

business model

Question 12

a. the frequency, value, and timing of sales in prior periods
b. the reason for those sales
c. expectation about future sales activity

Answer 12

“Hold to collect” business model

Question 13

a. sales of financial assets because of increase in credit risk
b. sales of financial assets with insignificant value, when such sales are frequent
c. sales of financial assets are infrequent, even when the sales have significant value
d. sales made close to the maturity when the sale proceeds approximate the collection of the remaining contractual cash flows

Answer 13

Hold to collect business model

Question 14

a. to manage everyday liquidity needs
b. to maintain a particular interest yield profile
c. to match the duration of the financial assets to the duration of the liabilities that those assets are funding

Answer 14

“Hold to collect and sell” Business model

Question 15

a. a debt instrument that is neither held under a “hold to collect” nor a “held to collect and sell” busines model
b. an equity instrument that the entity does to classify as FVOCI
c. an equity or debt instrument that meets the definition of a held for trading security

Answer 15

other business models

Question 16

a. acquired principally for the purpose of selling it in the near term
b. part of a portfolio of financial instrument that are managed together and for which there is evidenced of a recent actual pattern short-term profit taking
c. a derivative (except for a derivative that is financial guarantee contract or a designated and effective hedging instrument)

Answer 16

held for trading security

Question 17

a contract thar requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument

Answer 17

financial guarantee contract

Question 18

the fair value of the financial asset at initial recognition

Answer 18

principal

Question 19

consideration for the time value of money, for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs, as well as profit margin

Answer 19

interest

Question 20

measurement of financial assets

Answer 20

fair value plus transaction costs, except FVPL

Question 21

amount at which financial asset or financial liability is measured at initial recognition minus principal prepayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount and for financial assets adjusted for any loss allowance

Answer 21

amortized cost