Chapter 30 - Financial Instruments: QUESTION 30-11 Multiple Choice (PAS 32)

TFA 1
Chapter 30 – Financial Instruments

Erika Janine R. Aguila
QUESTION 30-11 Multiple choice (PAS 32)
1. A financial instrument is any contract that gives rise to

a. A financial asset
b. A financial liability
c. A financial asset of one entity and a financial liability of another entity
d. A financial asset of one entity and a financial liability or equity instrument of
another entity
2. Which of the following cannot be considered a financial asset?

a. Cash
b. A contractual right to receive cash or another financial asset from another entity.
c. A contractual right to exchange financial instruments with another entity under
conditions that are potentially unfavorable
d. An equity instrument of another entity
3. A financial liability
a. Must be classified as noncurrent liability.
b. Is a contractual obligation to deliver cash or another financial asset to another
entity.
c. Is a contractual obligation to exchange financial assets or financial liabilities with
another entity under conditions that are potentially favorable to the entity.
d. Is a contractual obligation to deliver cash or any asset to another entity.
4. It is any contract that evidences residual interest in the assets of an entity after deducting all
of the liabilities.
a. Equity instrument
b. Debt instrument
c. Loan and receivable
d. Financial asset with indeterminable fair value
5. Financial assets include all of the following, except

a. Prepaid expenses
b. Cash in bank
c. Trade accounts receivable
d. Loans receivable
6. Financial liabilities include all of the following, except

a. Trade accounts payable
b. Notes payable
c. Bonds payable
d. Income tax payable
7. How should preference shares that are redeemable mandatorily be presented in the statement
of financial position?
a. Noncurrent financial liability
b. Current financial liability
c. Equity
d. Either current or noncurrent financial liability depending on redemption date
8. What is the presentation of preference dividend on mandatorily redeemable preference

shares?
a. Deducted from retained earnings
b. Deducted from share premium
c. Finance cost as component of profit or loss
d. Finance cost as component of other comprehensive income
TFA 1
Angelika B. Abaya
QUESTION 30-12 Multiple choice (IFRS)

1. What is the principle for recognition of a financial asset?
a. A financial asset is recognized when it is probable that future economic benefits will flow to
the entity.
b. A financial asset is recognized when the entity obtains control of the instrument.
c. A financial asset is recognized when the entity obtains the risks and rewards of ownership of
the financial asset.
d. A financial asset is recognized when the entity becomes a party to the contractual
provisions of the instrument.
2. In which of the following circumstances is derecognition of a financial asset not appropriate?

a. The contractual rights to the cash flows of the financial asset have expired.
b. All the risks and rewards of ownership of the transferred asset have been transferred.
c. The entity has retained substantially all the risks and rewards of ownership of the
transferred asset.
d. The entity has lost control of the transferred asset.
3. Which of the following financial instruments would not be classified as financial liability?
a. A preference share that must be redeemed by the issuer for cash on a future date
b. A contract for the for delivery of as any of the entity’s ordinary shares as are equal in value to a
fixed amount of cash on a future date
c. A written call option that gives the holder the right to purchase a fixed number of the
entity’s ordinary shares in return for a fixed price
d. An issued perpetual debt instrument
4. Which of the following is a financial liability?

a. Deferred revenue
b. A warranty obligation
c. A constructive obligation
d. An obligation to deliver own shares worth a fixed amount of cash
5. Which of the following is not a relevant consideration whether to derecognize a financial

liability?
a. Whether the obligation has been discharged.
b. Whether the obligation has been canceled.
c. Whether the obligation has expired.
d. Whether substantially all the risks and rewards of ownership have been transferred.
TFA 1

Haidee A. Abrahan
QUESTION 30-13 Multiple Choice (IFRS)

1. Liquidity risk is defined as
a. The risk that an entity will encounter difficulty in meeting obligations associated
with financial liability.
b. The risk that the entity will encounter in disposing a financial asset due to lack of market
liquidity.
c. The risk that an entity will encounter in meeting cash flow needs due to cash flow
problems.
d. The risk that an entity’s cash inflows will not be sufficient to meet the entity’s cash
outflows.
2. The components of market risk are

a. Credit risk and liquidity risk
b. Currency risk and credit risk
c. Interest rate risk and currency risk
d. Liquidity risk and currency risk
3. 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 liability.
c. The risk that the fair value associated with an instrument will vary due to change in the
counterparty’s credit rating.
d. The risk that an entity’s credit facilities will be withdrawn due to cash flow sensitivities.
4. Which information is not required to be disclosed about exposure to risk arising from
financial instruments?
a. Information about market risk
b. Information about credit risk
c. Information about operational risk
d. Information about liquidity risk

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TFA 1

Chapter 30 – Financial Instruments

QUESTION 30-11 Multiple choice (PAS 32)

1. A financial instrument is any contract that gives rise to

2. Which of the following cannot be considered a financial asset?

5. Financial assets include all of the following, except

6. Financial liabilities include all of the following, except

8. What is the presentation of preference dividend on mandatorily redeemable preference

QUESTION 30-12 Multiple choice (IFRS)

2. In which of the following circumstances is derecognition of a financial asset not appropriate?

4. Which of the following is a financial liability?

5. Which of the following is not a relevant consideration whether to derecognize a financial

Chapter 30 – Financial Instruments

QUESTION 30-13 Multiple Choice (IFRS)

2. The components of market risk are

3. Which of the following best describes credit risk?

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