Question

In: Accounting

Multiple Choice Which of the following statements is true regarding investment in equity instruments by choosing...

Multiple Choice

  1. Which of the following statements is true regarding investment in equity instruments by choosing to apply the FVOCI option (fair value through other comprehensive income)
  1. Everything is correct
  2. Subject to the rules for impairment of PSAK 71 / IFRS 9
  3. Can be reclassified to FVTPL (fair value through profit or loss)
  4. Profits or losses recognized in OCI cannot be recycled to profit or loss
  1. Which classification is appropriate for the following financial assets: “A financial asset that is managed in a business model whose purpose would be fulfilled by obtaining contractual cash flows and selling the financial asset and the contractual terms of the financial asset entitling a specific date to cash flows that are solely the principal payment. and interest on the principal outstanding ":
  1. Financial assets are measured at fair value through profit or loss
  2. Financial assets are measured at cost
  3. Financial assets are measured at fair value through other comprehensive income
  4. Financial assets are measured at amortized cost
  1. Which is the most appropriate statement:
  1. Financial assets cannot be reclassified
  2. Financial liabilities can be reclassified if, and only if, the entity's business model changes
  3. Financial assets and financial liabilities cannot be reclassified
  4. Financial assets can be reclassified if, and only if, the entity changes its business model for managing the financial assets.

Solutions

Expert Solution

Question 1:

Option D. Profit or losses recognized in OCI cannot be recycled to profit and loss account.

The profit or loss recognized in oci for changes in fair value are to be recognized in oci and they are never recycled to profit and loss account as defined in the standard itself.

Question 2 :

Option D. Financial statements measured at Amortised cost.

As the purpose of holding is solely for the purpose of interest and principal amount and to hold till the contract closure. It has to be me as at Amortised cost as sppi test is satisfied.

Question 3:

Option D financial assets can be reclassified if and only if the entity changes it's business model for managing the financial assets.

Financial liabilities reclassification is not in the hands of the entity as it is determined based on the conditions imposed by the loan provider.

Financial assets reclassification can be done when there is a change from held to maturity to held to trading etc.,


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