Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
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Question
Chapter 16, Problem 2BCC
1.
To determine
To state: When entities must make the fair value option election and why the board makes the decision.
2.
To determine
The main concerns expressed by the respondents to the Exposure Draft to the approach and the reason why the FASB decided to allow the instrument-by-instrument approach.
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PROBLE
other financial assets.
associates and joint ventures.
delivering cash or another financial asset. However, Entity A's
not sufficient to justify offsetting because the rights and
d. An intention to settle a financial asset and a financial
2 A contract that evidences a residual interest in the entity's
assets after deducting all of its liabilities is classified as
4. Entity A issues an instrument that is re-purchasable by
d. Liabilities arising from constructive obligations.
Physical assets, such as inventories and PPE.
and financial liability remain unaltered.
Which of the following is within the scope of PAS 32?
b. Contracts for the delivery or receipt of commodity and
other non-financial items that can be settled net in cash or
Financial assets in the form of investments in subsidiaries,
1.
a.
b.
Co non-financial items that can be settled net in cash or
Physical assets, such as inventories and PPE
C.
ssets after deducting all of its liabilities is classified as
a. a financial…
Which of the following is correct regarding the classification of investment in debt instruments as financial asset at fair value through OCI?
Group of answer choices
A. An entity may make an irrevocable election to classify investment in a debt instrument that is not ‘held for trading’ as such.
B. All of these.
C. This classification is not allowed for investment in debt instruments.
D. In order to be classified as such, a debt instrument needs to both have simple principal and interest cash flows and be held in a business model in which both holding and selling financial assets are integral to meeting management’s objectives.
How shall an entity subsequently measure financial liabilities? Is IFRS measurement of financial liabilities similar to that of U.S. GAAP?
Also briefly describe the requirements regarding an option to designate a financial liability at fair value through profit and loss.
Q: Does U.S. GAAP allow fair value option for financial assets and liabilities?
Q; What is “own credit” issue related to financial liabilities measured at fair value through profit and loss?
Q: How does IFRS 9 address this “own credit” issue?
Chapter 16 Solutions
Intermediate Accounting
Ch. 16 - Prob. 16.1QCh. 16 - Is reporting an investment at its cost considered...Ch. 16 - Prob. 16.3QCh. 16 - Prob. 16.4QCh. 16 - Prob. 16.5QCh. 16 - Prob. 16.6QCh. 16 - What categories can managers use to classify...Ch. 16 - When is the equity method of accounting for...Ch. 16 - Prob. 16.9QCh. 16 - Can companies apply the fair value option to all...
Ch. 16 - What is the fair value hierarchy for investment...Ch. 16 - Prob. 16.12QCh. 16 - Prob. 16.13QCh. 16 - Prob. 16.14QCh. 16 - Prob. 16.15QCh. 16 - Prob. 16.16QCh. 16 - Prob. 16.17QCh. 16 - Deutsch Imports has three securities in its...Ch. 16 - Prob. 16.2MCCh. 16 - Prob. 16.3MCCh. 16 - Prob. 16.4MCCh. 16 - Prob. 16.5MCCh. 16 - Prob. 16.6MCCh. 16 - Prob. 16.7MCCh. 16 - Prob. 16.1BECh. 16 - Prob. 16.2BECh. 16 - Debt Investments, Trading. Using the information...Ch. 16 - Prob. 16.4BECh. 16 - Prob. 16.5BECh. 16 - Prob. 16.6BECh. 16 - Prob. 16.7BECh. 16 - Prob. 16.8BECh. 16 - Prob. 16.9BECh. 16 - Prob. 16.10BECh. 16 - Prob. 16.11BECh. 16 - Prob. 16.12BECh. 16 - Prob. 16.13BECh. 16 - Notes Receivable. Aaron Anatole accepted a...Ch. 16 - Prob. 16.15BECh. 16 - Prob. 16.16BECh. 16 - Prob. 16.17BECh. 16 - Debt Investments. Impairments. IFRS. For each debt...Ch. 16 - Prob. 16.19BECh. 16 - Prob. 16.1ECh. 16 - Prob. 16.2ECh. 16 - Prob. 16.3ECh. 16 - Prob. 16.4ECh. 16 - Prob. 16.5ECh. 16 - Prob. 16.6ECh. 16 - Prob. 16.7ECh. 16 - Debt and Equity Investments, Available-for-Sale...Ch. 16 - Prob. 16.9ECh. 16 - Equity Investments without a Readily Determinable...Ch. 16 - Prob. 16.11ECh. 16 - Prob. 16.12ECh. 16 - Prob. 16.13ECh. 16 - Equity-Investments, Equity Method. Book Value of...Ch. 16 - Prob. 16.15ECh. 16 - Prob. 16.16ECh. 16 - Notes Receivable. Each of the following three...Ch. 16 - Prob. 16.18ECh. 16 - Prob. 16.19ECh. 16 - Prob. 16.20ECh. 16 - Prob. 16.21ECh. 16 - Prob. 16.22ECh. 16 - Prob. 16.23ECh. 16 - Prob. 16.24ECh. 16 - Prob. 16.25ECh. 16 - Prob. 16.1PCh. 16 - Debt Investments, Trading. Freder Software Group...Ch. 16 - Prob. 16.3PCh. 16 - Equity Investments, Readily Determinable Fair...Ch. 16 - Prob. 16.5PCh. 16 - Prob. 16.6PCh. 16 - Prob. 16.7PCh. 16 - Prob. 16.8PCh. 16 - Prob. 16.9PCh. 16 - Prob. 16.10PCh. 16 - Prob. 16.11PCh. 16 - Equity Investments, Equity Method, Fair Value...Ch. 16 - Prob. 16.13PCh. 16 - Prob. 16.14PCh. 16 - Prob. 16.15PCh. 16 - Prob. 16.16PCh. 16 - Prob. 16.17PCh. 16 - Prob. 16.18PCh. 16 - Prob. 16.19PCh. 16 - Prob. 1JCCh. 16 - Prob. 2JCCh. 16 - Prob. 1SSCCh. 16 - Prob. 1BCCCh. 16 - Prob. 2BCC
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Similar questions
- Which of the following statements is true?(a) The fair value option requires that some types of financial instruments be recorded at fair value.(b) The fair value option requires that all concurrent financial instruments be recorded at amortized cost.(c) The fair value option allows, but does not require, that some types of financial instruments be recorded at fair value.(d) The FASB and IASB would like to reduce the reliance on fair value accounting for financial instruments in the future.arrow_forwardTRUE OR FALSE 1. PFRS 4 SUPERSEDES PFRS17 2.PFRS 17 APPLIES TO REINSURANCE CONTRACTS3.INCOME SERVICE IS RECOGNIZED IN OTHER COMPREHENSIVE INCOME4. PFRS17 APPLIES TO INVESTMENT CONTRACTS WITH DISCRETIONARY FEATURES REGARDLESS IF THE ENTITY ALSO ISSUES INSRANCE CONRACS OR NIarrow_forwardAll of the following are true of the effect of fair value accounting on the financial statements except: a. any difference between the original cost or the prior period’s fair value must be recorded b. changes in the fair value of trading securities are recognized on the income statement c. valuation allowance accounts are reported on the balance sheet d. changes in the fair value of available-for-sale securities are recognized on the income statementarrow_forward
- What is the principle for recognition of a financial asset in PFRS 9? A. A financial asset is recognized when, and only when, the entity obtains control of the instrument and has the ability to dispose of the financial asset independent of the actions of others. B.A financial asset is recognized when, and only when, the entity becomes a party to the contractual provisions of the instrument. C. A financial asset is recognized when, and only when, the entity obtains the risks and rewards of ownership of the financial asset and has the ability to dispose of the financial asset. D. A financial asset is recognized when, and only when, it is probable that future economic benefits will flow to the entity and the cost or value of the instrument can be measured reliably.arrow_forwardWhich of the following is correct regarding the classification of investment in debt instruments as financial asset at fair value through OCI? Group of answer choices All of these. An entity may make an irrevocable election to classify investment in a debt instrument that is not ‘held for trading’ as such. In order to be classified as such, a debt instrument needs to both have simple principal and interest cash flows and be held in a business model in which both holding and selling financial assets are integral to meeting management’s objectives. This classification is not allowed for investment in debt instruments.arrow_forwardWhat is the principle for recognition of a financial asset in PFRS 9? Group of answer choices: A financial asset is recognized when, and only when, the entity obtains the risks and rewards of ownership of the financial asset and has the ability to dispose of the financial asset. A financial asset is recognized when, and only when, the entity obtains control of the instrument and has the ability to dispose of the financial asset independent of the actions of others. A financial asset is recognized when, and only when, it is probable that future economic benefits will flow to the entity and the cost or value of the instrument can be measured reliably. A financial asset is recognized when, and only when, the entity becomes a party to the contractual provisions of the instrument.arrow_forward
- Investment in debt instruments classified as FA@FVTOCI recognizes which of the following in OCI? Group of answer choices Impairment gains and losses All of these Interest calculated using the effective interest method. Changes in fair valuearrow_forwardq13 According to IFRS, which accounting policy may an entity apply to measure investment property in periods subsequent to initial recognition? Select one: a. Fair value model or revaluation model. b. Cost model or fair value model c. Fair value model only. d. Cost model or revaluation model.arrow_forward13 Under what circumstances under PFRS 9 can an entity classify financial assets that meet the amortized cost criteria as at FVTPL? Group of answer choices Where the instrument is held to maturity. Where the business model approach is adopted. Where the financial asset passes the contractual cash flow characteristics test. Not sure If doing so eliminates or reduces an accounting mismatch.arrow_forward
- What is the date on which the fair value of the equity instrument granted is measured? a. Measurement date b. Report date c. Grant date d. Exercise datearrow_forwardAASB 13 defines exit price as: Select one: A. The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. B. The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. C. The price that would be received to sell an asset or paid to transfer a liability. D. A transaction that assumes exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities; it is not a forced transaction (e.g., a forced liquidation or distress sale).arrow_forwardWhen the contractual cash flows of a financial asset are renegotiated or otherwise modified and the renegotiation or modification does not result in the derecognition of that financial asset in accordance with PFRS 9, an entity shall I. Recalculate the gross carrying amount of the financial asset as the present value of the renegotiated or modified contractual cash flows that are discounted at the financial asset's original effective interest rate. II. Recognize a modification gain or loss in profit or loss. A. I only. B. Neither I nor II. C. ll only. D. Both I and II.arrow_forward
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