Question 1

According to IFRS 9, which of the following best describes a financial asset?

Accepted Answer

A contractual right to receive cash or another financial asset from another entity.

Question 2

Which of the following transactions would result in the initial recognition of a financial liability in the statement of financial position?

Accepted Answer

A company borrows R500,000 from a bank, with interest payable annually.

Question 3

Which of the following is NOT considered a financial instrument under IAS 32?

Accepted Answer

Property, plant, and equipment.

Question 4

A company acquires 1,000 shares in another entity for R10,000 and incurs R500 in transaction costs. If the shares are classified as 'at fair value through profit or loss,' what is the initial measurement of the financial asset?

Accepted Answer

$$R10,000$$

Question 5

Which of the following best describes the subsequent measurement of a financial asset classified as 'at fair value through other comprehensive income'?

Accepted Answer

Measured at fair value with gains and losses recognised in other comprehensive income.

Question 6

Which of the following is a key criterion for classifying a financial asset at fair value through profit or loss under IFRS 9?

Accepted Answer

The asset is held for trading purposes.

Question 7

A company issues 1,000 redeemable preference shares, which are redeemable in cash at the option of the holder. How should these shares be classified in the issuer’s financial statements?

Accepted Answer

As a financial liability.

Question 8

Which of the following statements about transaction costs is correct under IFRS 9?

Accepted Answer

Transaction costs are included in the initial measurement of financial assets at fair value through other comprehensive income.

Question 9

Which of the following scenarios would result in the derecognition of a financial asset?

Accepted Answer

The company’s right to receive cash flows from the asset expires.

Question 10

If a company sells a financial asset at fair value through profit or loss for more than its carrying amount, how is the gain recognised?

Accepted Answer

The gain is recognised in profit or loss.

Question 11

Which of the following is a requirement for offsetting a financial asset and a financial liability in the statement of financial position?

Accepted Answer

The entity has a legally enforceable right to set off the recognised amounts.

Question 12

A company acquires a bond for R1,000,000 with transaction costs of R10,000. The bond is classified as 'at fair value through other comprehensive income.' What is the initial measurement of the bond?

Accepted Answer

$$R1,010,000$$

Question 13

Which of the following best describes the treatment of interest, dividends, gains, and losses relating to a financial liability?

Accepted Answer

They are recognised in profit or loss.

Question 14

Which of the following is NOT a requirement for derecognition of a financial liability?

Accepted Answer

The liability is reclassified as equity.

Question 15

A company holds shares in another entity as a long-term investment and designates them as 'at fair value through other comprehensive income.' At year-end, the fair value increases. How is this increase accounted for?

Accepted Answer

Recognised in other comprehensive income and accumulated in equity.

Question 16

Which of the following is a correct journal entry for the initial recognition of a financial asset at fair value through profit or loss, purchased for R20,000 with R1,000 transaction costs?

Accepted Answer

Dr Financial asset R20,000; Dr Transaction cost (P/L) R1,000; Cr Bank R21,000

Question 17

Which of the following is a key difference between financial assets at fair value through profit or loss and those at fair value through other comprehensive income?

Accepted Answer

Gains and losses are recognised in profit or loss for the former and in other comprehensive income for the latter.

Question 18

Which of the following is NOT a financial asset under IFRS 9?

Accepted Answer

Inventory held for sale.

Question 19

A company sells a financial asset at fair value through other comprehensive income. What happens to the cumulative gain or loss previously recognised in other comprehensive income?

Accepted Answer

It is transferred to retained earnings.

Question 20

Which of the following best describes the classification of a preference share that is redeemable only at the option of the issuer?

Accepted Answer

It is classified as equity.

Financial Instruments: Recognition, Measurement, and Disclosure (IFRS 7, 9 & IAS 32)

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