EX 7. Non-current Financial Assets and liabilities – Exercises
1. What is a Financial Instrument?
2. Give some examples of current and non-current assets and liabilities that are
financial instruments.
Assets
Liabilities
Current
Non-current
3. Financial instruments should be recorded on initial recognition at Fair Value. What
does this mean and what are the three levels of inputs to this specified in IFRS 13?
4.How are the following types of financial instruments required to be subsequently
measured?
a) Financial assets held for trading
b) Financial liabilities held with the intention of holding till maturity in order to
collect the cash flows
c) Investments in other companies held for strategic purposes and classified as
Available for Sale.
5. Calculate the Amortized cost of the following Loan.
Nominal value $ 1,250 4.7% interest, maturity December 2018
Purchase price $ 1,000 in December 2013
IRR is calculated as 10%
Amortized cost Interest income
at start of year
Cash flows
Amortized cost
at end of year
2014
2015
2016
2017
2018
A 860454 Accounting & Financial Reporting
Paul G. Smith
6. How should a company account for a Compound Financial Instrument?
7. Companies use derivative contracts to mitigate their exposure to the market risks
associated with financial instruments. Describe the three types of market risk that they
seek to manage.
8. What are the three types of hedges that companies use to manage the risks
associated with the financial instruments that they hold. Describe each of these and
the risks that they are designed to mitigate.
9. How are changes in the fair value of derivative financial instruments designated as
hedges accounted for? Describe this for each of the three types of hedge.
10. Which of the following give rise to a financial instrument?
a) a credit sale transaction
b) A firm commitment to purchase or sell goods or services at a future date
c) A forward contract to purchase a commodity at a specific price at a future
date
d) An option to purchase or sell goods at a future date for a specific price
e) A planned future contract
A 860454 Accounting & Financial Reporting
Paul G. Smith