Available-for-sale financial assets Financial assets

Chapter 20 – Financial Instruments Page 295 8. Which TWO of the following are types of hedging relationship as defined by IAS39 Financial instruments: recognition and measurement? A Cash flow hedge B Credit risk hedge C Interest rate hedge D Fair value hedge 9. Are the following statements concerning the measurement of financial instruments after initial recognition true or false, according to IAS39 Financial instruments: recognition and measurement? 1 Held-for-trading financial assets are measured at amortised cost. 2 Held-to-maturity investments are measured at fair value. Statement 1 Statement 2 A False False B False True C True False D True True 10. In accordance with IFRS7 Financial instruments: disclosures, which ONE of the following best describes the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities? A Credit risk B Financial risk C Liquidity risk D Payment risk 11. In accordance with IFRS7 Financial instruments: disclosures which TWO of the following are components of market risk? A Credit risk B Currency risk C Interest rate risk D Liquidity risk Chapter 20 – Financial Instruments Page 296 12. Which TWO of the following are classified as financial instruments in accordance with IAS32 Financial instruments: presentation? A Patents B Trade receivables C Inventories D Trade payables 13. Which ONE of the following is not classified as a financial instrument in accordance with IAS32 Financial instruments: presentation? A Convertible bond B Foreign currency contract C Warranty provision D Loan receivable 14. Are the following statements about dividends true or false, according to IAS32 Financial instruments: presentation? 1 Dividends in respect of ordinary shares are debited directly in equity. 2 Dividends in respect of redeemable preference shares are debited directly in equity. Statement 1 Statement 2 A False False B False True C True False D True True Chapter 20 – Financial Instruments Page 297 15. The Freemantle Company has issued the following two types of financial instrument to raise capital: 1 Convertible bonds which are redeemable for cash in five years time. The holders have the right to request the issue of a fixed number of new ordinary shares in lieu of cash. The holders have not yet indicated whether they will exercise the right to receive the new ordinary shares. 2 Preference shares with no fixed date for redemption. The preference shares are redeemable for cash at any time in the future at the option of Freemantle. Freemantle must give 6 months written notice of its intention to redeem the preference shares and no notice has yet been given. In accordance with IAS32 Financial instruments, presentation, the appropriate classifications for these financial instruments are Convertible bonds Preference shares A Compound financial instrument Equity instrument B Financial liability Compound financial instrument C Compound financial instrument Equity instrument D Financial liability Compound financial instrument 16. The Proctor Company has 300 7 preference shares in issue. They are redeemable on 31 December 20X9. How will the preference shares and the related preference dividend be presented in Proctors financial statements for the year ended 31 December 20X6, according to IAS32 Financial instruments: presentation? Preference shares Preference dividend A Non-current liability Deducted from equity B Equity Deducted from equity C Equity Finance cost D Non-current liability Finance cost