Name: Course & Year: Subject: CFAS

PROBLEM 1: MULTIPLE CHOICE

1. Which of the following best indicates that two parties are related for purposes of PAS 24?

a. One party has the ability to affect the financial and operating decisions of the other party through control,
significant influence or joint control.
b. One party is larger than the other.
c. The parties are a parent and a subsidiary.
d. One party is in the private sector and the other is a government regulatory body.

2. Which of the following are not related parties?

a. Two co-venturers of a common joint venture business

b. A parent and its subsidiary
c. Two or more subsidiaries with the same parent
d. A company and its Chief Executive Officer

3. Which of the following is not a required disclosure under PAS

a. Relationships between parents and subsidiaries

b. Key management personnel compensation
c. Related party transactions (in the separate financial statements)
d. Related party transactions (in the consolidated financial statements)

PROBLEM 2: FOR CLASSROOM DISCUSSION

1. According to PAS 24, related party disclosures are necessary

a. because related party transactions may have resulted to assets and liabilities that were recognized in the
financial statements of the reporting entity.
b. to notify users of financial statements of the fact that related party transactions may not have been made on
arm's length basis.
c. to indicate the possibility that an entity's financial position and performance might have been affected by the
existence of such relationship.
d. in order to eliminate or minimize the effects of related party transactions on the financial statements of the
reporting entity.

2. What is overriding consideration when determining existence of a related party relationship?

a. The ability of one party to affect the decisions of another party regarding relevant activities through the
existence of control, joint control or significant influence.
b. The presence of relationship either by or consanguinity or affinity.
c. The presence of a significant interest by one party over the other.
d. The presence of significant business transactions and economic dependence between the parties.

3. Mr. Y and Ms. Z share joint control over Ventures, Inc. Which of the following are related parties?

a. Mr. Y and Ms. Z c. Ventures, Inc. and PAS 24

b. Ventures, Inc. and Mr. Y d. none of these

4. Entity A is the parent company of Entity B. Which of the following is required to be disclosed in the group's (Entity A
and B's) consolidated financial statements?

a. the related party relationship between Entity A and Entity B

b. the related party transactions during the period
c. the outstanding balances in (c)
d. all of these
Name: Course & Year: Subject: CFAS

PROBLEM 1: MULTIPLE CHOICE

1. Are there any circumstances when a contract that is not a financial instrument would be accounted for as a
financial instrument under PAS 32 and PFRS 9?

a. No. Only financial instruments are accounted for as financial instruments.

b. Yes. Gold, silver, and other precious metals are readily convertible to cash are accounted for as financial
instruments.
c. Yes. A contract for the future purchase or delivery of a commodity or other nonfinancial item (e.g. gold,
electricity, or gas) generally is accounted for as a financial instrument if the contract can be settled net.
d. Yes. An entity may designate any financial asset that can be readily convertible to cash as a financial
instrument.

2. Which of the following is not a financial instrument?

a. Accounts receivable c. Derivative asset

b. Notes payable d. Inventory

3. Which of the following is classified as an entity's own equity instrument rather than a financial liability?

a. A contract that requires the delivery of a variable number of the entity's own equity instruments in exchange
for a fixed amount of cash or another financial asset.
b. A contract that requires the delivery of a fixed number of the entity's own equity instruments in exchange for
a variable amount of cash or another financial asset.
c. A contract that requires the delivery or receipt of a fixed number of the entity’s own equity in exchange for a
fixed amount of cash or another financial
d. Shares issued by the entity in which the holders have the right to redeem.

4. The overriding consideration for an issuer when classifying a financial instrument as either financial liability or
equity instrument is

a. the absence or existence of a contractual obligation to pay cash or another financial asset. The existence of
such an obligation indicates that the instrument is most likely a financial liability.
b. whether the instrument contains both a liability and an equity component.
c. Whether the instrument is the entity's own shares that were previously issued but were subsequently
reacquired but not retired.
d. whether the instrument grants the issuer a legal right of setoff and that the instrument can be settled
net.

5. Entity A has an accounts receivable of P100 from, and at the same time an accounts payable of P80 to, Entity B.
When determining whether it is appropriate to offset the accounts and present a net amount of P20 in accounts
receivable, Entity A should assess if it has

a. a legal right of setoff.

b. an intention to settle the amounts on a net basis simultaneously.
c. a contractual obligation to pay cash or another financial asset.
d. a and b

PROBLEM 2: FOR CLASSROOM DISCUSSION

Financial instruments

1. A contract that will be settled by the entity receiving or delivering a fixed number of its own equity instruments in
exchange for a fixed amount of cash or another financial asset is most likely to be classified by the issuer as

a. a financial liability c. a or b
b. an equity instrument d. neither a nor b
Presentation

2. Which of the following is classified as an equity instrument rather than a financial liability?

a. Preference shares that are mandatorily redeemable

b. A contract that is settled by the delivery of a variable number of the entity's own equity instruments in
exchange for a fixed amount of cash or another financial asset.
c. contract that is settled by the delivery of a fixed number of the entity's own equity instruments in exchange for
a variable amount of cash or another financial asset.
d. Shares issued but were subsequently reacquired.

Compound instruments

3. Entity A issues convertible bonds with face amount of for P2,000,000for P2,600,000. Each P1,000 bond is
convertible into 10 shares with par value of P60 per share. On issuance date, the bonds are selling at 102 without the
conversion option. What is the value allocated to the equity component on initial recognition?

a. 2,040,000 c. 540,000
b. 560,000 d. 460,000

Treasury shares, Interest, Dividends, Losses and Gains

4. Which of the following statement is correct?

a. Entity A reacquires its own shares for P10,000. The shares were originally issued for P4,000. Entity A
recognizes a loss of P6,000.
b. Gains and losses arising from a financial liability are recognized in directly in equity.
c. Entity A declares dividends. Entity A will recognize the amount of the dividends as expense in profit or loss.
d. Entity A settles a liability with carrying amount of P100,000 for P85,000. This transaction results to a P15,000
gain that is recognized in profit or loss.

Offsetting

5. Entity A has an account receivable of P200,000 from Entity B. In addition, Entity A also has an account payable of
P160,000 to Entity B. The account receivable is due in 30 days while the account payable is due in 90 days. Entity A
intends to settle first the account receivable. If Entity A has a legal right of set- off, how much account receivable will
be shown in its statement of financial position?

a. 200,000 c. 160,000
b. 40,000 d. a orb