Question

If the value of an asset that has been written down later increases, to what extent may the related gain be recognized?

None of the gain may be recognized.

Up to the amount of the original loss.

Up to the fair market value of the asset.

No remeasurements may be recognized.

Inputs to income models include which of the following?

adjusting cash flows and the discount rate in the same calculation

actual cash flows

time value of money

using a risk-free and risk-adjusted interest rate

Under the expected cash flow approach,

the discount rate is adjusted to accommodate the riskiness of the cash flows.

the projected cash flows reflect the certainty in terms of amount and timing.

the cash flow uncertainty is dealt with by using probabilities.

the model is best used where the element being measured does not have variable cash flows.

Which of the following is an example of an item that would be measured under the hybrid measurement categorization?

investment properties.

inventory measured at the lower of cost and net realizable value.

biological assets.

financial instruments carried at cost.

Answer 1

1) If the value of an asset that has been written down later increases, the realated gain should be recognized upto the fair market value of the assets as per accounting process of revaluation

*So the correct answer is " upto the fair market value of the asset."

2) Inputs to income models include:

-Cashflow estimates- Management makes their bet estimates of estimated cashflows along with their contractual cashflows.

-Risk uncertainity- the discounted cashflows will reflect the risk of uncertainity since all cashflows are not the same.

-time value of money- A risk free rate or risk adjusted rate may be used to discount the cashflows.

*So the correct answer is "time value of money".

3)The concept of the risk-adjusted discount rate reflects the relationship between risk and return.

*So the correct answer is "the discount rate is adjusted to accommodate the riskiness of the cash flows."

4)Under hybrid measurement, additional information in the medical records may be taken into account to support claims of administrative data.

*So the answer is "biological assets".