IFRIC 2 Members’ shares in co-operative entities and similar instruments

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 Chapter 20 – Financial Instruments Page 298 17. Prior to 1 January 20X7 The Oldfield Company had not held any equity investments in other companies. On 1 January 20X7 Oldfield purchased 3 of the equity shares in The Goddard Company with the intention of holding this investment over the long term. In accordance with IAS39 Financial instruments: recognition and measurement, the most appropriate classification of the equity investment in Goddard by Oldfield is select one answer A at fair value through profit or loss B available for sale C held to maturity D amortised cost 18. The Grayburn Company acquired 30,000 equity shares, representing 5 of the issued ordinary share capital in The Teddard Company. Teddards shares are listed on a Stock Exchange. In accordance with IAS39 Financial instruments: recognition and measurement, in which TWO of the following categories could Grayburns investment in the equity shares be classified? A Held to maturity B Available for sale C At fair value through profit or loss D Loans and receivables 19. The Greenday Company acquired 30,000 4 Government Bonds redeemable in 20X9 at the quoted market price of CU200. Greenday has no current intention to sell the Bonds and has a policy to hold them as investments unless certain corporate criteria are met and the bonds are sold to maintain liquidity. In accordance with IAS39 Financial instruments: recognition and measurement, which ONE of the following is the most appropriate classification for Greendays investment in the Government Bonds? A Held for trading B At fair value through profit or loss C Held to maturity D Available for sale Chapter 20 – Financial Instruments Page 299 20. Are the following statements true or false, in accordance with IFRS7 Financial instruments: disclosures? 1 The carrying amount of held-to-maturity investments must be disclosed in the statement of financial position. 2 The amount of any impairment loss for each class of financial asset must be disclosed in the statement of comprehensive income. Statement 1Statement 2 A False False B False True C True False D True True 21. Are the following statements about disclosures within the financial statements true or false, according to IFRS7 Financial instruments: disclosures? 1 The disclosure of quantitative data about an entitys risk exposure shall be based upon internal information provided to key management personnel. 2 A maturity analysis for financial liabilities based on the expected payment dates for those liabilities shall be disclosed. Statement 1 Statement 2 A False False B False True C True False D True True 22. The Stone Company has an account receivable from The Knowles Company of CU55,000. Stone also has an account payable to Knowles of CU15,000. Local law allows the enforceable right of set-off of the recognised amounts. It is not normal business practice to settle the amounts net. What amount for accounts receivable and accounts payable should be presented in Stones statement of financial position, according to IAS32 Financial instruments: presentation? Accounts receivable Accounts payable A CU55,000 CU15,000 B CU40,000 Nil C CU55,000 Nil D Nil CU15,000