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Enrichment Learning Activity: Name: Date: Year and Section: Instructor: Module #: Topic
Enrichment Learning Activity: Name: Date: Year and Section: Instructor: Module #: Topic
Directions: ANSWER PROBLEM 3 – MULTIPLE CHOICE THEORY OF YOUR BOOK. List your answers in this file.
1. All of the following are characteristics of a derivative financial instrument except the instrument.
A. Has one or more underlyings and an identified payment provision
B. Requires a large investment at the inception of the contract
C. Requires or permits settlement
D. All of these are characteristics
2. In order for financial instrument to be a derivative for accounting purposes, the financial instruments must:
I. Have one or more underlyings
II. Require an initial net investment
A. I only
B. II only
C. Both I and II
D. Neither I nor II
3. The determination of the value or settlement amount of a derivative involves a calculation which uses:
I. An underlying
II. A notional amount
A. I only
B. II only
C. Both I and II
D. Neither I nor II
4. This derivative represents a private contract between two parties to exchange a specified amount of a
commodity, security, or foreign currency at a specified date in the future at pre-agreed price
A. Forward contract
B. Futures contract
C. Backward contract
D. Pasts contract
5. It is an option to buy.
A. Put option
B. Call option
C. Buy option
D. Place option
6. Ain’t My Company acquired a put option for a commodity. The strike price in the option is P10. If the current
price is P12 the option is said to be
A. At the money
B. In the money
C. Out of the money
D. No money, no honey
7. it is a contract between two parties who agree to exchange future interest payments on a given loan
amount.
A. Forward contract
B. Future contract
C. Interest rate swap
D. Option contract
8. Which of the following financial instruments is not considered a derivative financial instruments?
A. Interest rate swaps
B. Currency futures
C. Stock-index options
D. Bank certificates of deposit
9. Which of the following statements is correct regarding the accounting for derivatives?
A. Only derivatives which are designated as hedging instruments are accounted for
B. Subsequent changes in the fair value of a derivative are always recognized in profit or loss
C. All derivates are measured at fair value
D. In rare cases, a derivate may be measured at cost
10 .All of the following statements regarding accounting for derivatives are correct except that
A. They should be recognized in the financial statements as assets and liabilities
B. They should be reported at fair value
C. Gains and losses resulting from speculation should be deferred
D. Gains and losses resulting from hedge transaction are reported in different ways, depending upon the
type of hedge
11. A change in the fair value of a derivative qualified as a cash flow hedge is determined to be either effective
in off setting a change in the hedged item or ineffective in off setting such a change. How should the effective
and ineffective portions of flow hedge be reported in financial statements?
Effective portion in Ineffective portion in
A. Current income Current income
B. Current income Other comprehensive income
C. Other comprehensive income Current income
D. Other comprehensive income Other comprehensive income
12. The accounting for fair value hedges records the derivative at its
A. Amortized cost
B. Carrying value
C. Fair value
D. Historical cost
13. Qualified derivatives may be use to hedge the cash flow associated with an/a:
Asset Forecasted transaction
A. Yes Yes
B. Yes No
C. No Yes
D. No No
14. Gains or losses on cash flow hedges are
A. Ignored completely
B. Recorded in equity, as part of other comprehensive income
C. Reported directly in net income
D. Reported directly in retained earnings
15. Which of the following is considered as basic financial instrument and is, therefore, outside the scope of
Section 12 of the PFRS for SMEs and included within the scope of Section 11?
A. Asset- backed securities, such as collateralized mortgage obligations, repurchase agreements and
securitized packages of receivable
B. Option, rights, warrants, future contracts, forward contracts and interest rate swaps that can be settled
in cash or by exchanging another financial instruments
C. Financial instruments that qualify and are designated as hedging instruments
D. Investment in non-convertible preference shares and non-puttable ordinary shares or preference
shares.