Financial assetliability at fair value through profit or loss

Chapter 20 – Financial Instruments Page 293 17 Self Test Questions Chapter 20 1. In accordance with IAS32 Financial instruments: presentation, which ONE of the following types of instrument is best described as a contract that evidences a residual interest in the assets of an entity after deducting the liabilities? A Financial liability B Guarantee C Equity D Financial asset 2. In accordance with IAS39 Financial instruments: recognition and measurement, which ONE of the following terms best describes a compound financial instrument component of a hybrid instrument that also includes a non-derivative host contract? A An available-for-sale financial asset B An embedded derivative C A held-to-maturity investment D A financial asset held for trading 3. In accordance with IFRS7 Financial instruments: disclosures, which of the following best describes the risk that an entity will encounter if it has difficulty in meeting obligations associated with its financial liabilities? A Liquidity risk B Credit risk C Financial risk D Payment risk 4. In accordance with IFRS7 Financial instruments: disclosures, which of the following best describes credit risk? A The risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation B The risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities C The risk that the fair value associated with an instrument will vary due to changes in the counterpartys credit rating D The risk that an entitys credit facilities will be withdrawn due to cash flow sensitivities Chapter 20 – Financial Instruments Page 294 5. Are the following statements about treasury shares true or false, according to IAS32 Financial instruments: presentation? 1 Treasury share purchases are recognised as financial assets. 2 Any gain or loss on purchasing treasury shares is recognised in profit or loss. Statement 1 Statement 2 A False False B False True C True False D True True 6. Are the following statements true or false, according to IAS32 Financial instruments: presentation? 1 Transaction costs of issuing equity instruments are charged against income. 2 The components of a compound financial instrument are classified separately in accordance with their substance. Statement 1 Statement 2 A False False B False True C True False D True True 7. The Tootakk Company has entered into a contract on 1 June 20X3 that requires it to issue its own ordinary shares with a value of CU250,000 on 31 May 20X6. In accordance with IAS32, Financial instruments: presentation, Tootakk should classify the contract as select one answer A a financial asset B a financial liability C an equity instrument D an embedded derivative