Statement No. 133 Accounting for Derivative Instruments and Hedging Activities establishes accounting and reporting standards for derivative instrument embedded in other contracts and for hedging activities. The statement requires that an entity recognize all derivatives as either assets or liabilities in the statements of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as: A hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment. A hedge of the exposure to variable cash flows of a forecasted transactions or A hedge of the foreign currency exposure a net investment in a foreign operation, an unrecognized firm commitment, an available for sale security or a foreign currency denominated forecasted transactions. a.. Evaluate Statement No.133 in terms of the conceptual framework. b. Define a derivative from an accounting perspective and provide at least three characteristics of a derivative. c. Name and describe three derivatives. d. Briefly summarize the statement. When was the implementation date of the statement?

Statement No. 133 Accounting for Derivative Instruments and Hedging Activities establishes accounting and reporting standards for derivative instrument embedded in other contracts and for hedging activities. The statement requires that an entity recognize all derivatives as either assets or liabilities in the statements of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as: A hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment. A hedge of the exposure to variable cash flows of a forecasted transactions or A hedge of the foreign currency exposure a net investment in a foreign operation, an unrecognized firm commitment, an available for sale security or a foreign currency denominated forecasted transactions. a.. Evaluate Statement No.133 in terms of the conceptual framework. b. Define a derivative from an accounting perspective and provide at least three characteristics of a derivative. c. Name and describe three derivatives. d. Briefly summarize the statement. When was the implementation date of the statement?

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter13: Marketable Securities And Derivatives

Section: Chapter Questions

Problem 8Q

See similar textbooks

Similar questions

Which of the following are exceptions for PFRS 9 application? CHOICES Contracts to buy or sell a non-financial item that can be settled net in cash or another financial instrument as if the contracts were financial instruments Derivatives that are embedded in leases Contracts that were entered into and continue to be held for the purpose of the receipt or delivery of a non-financial item in accordance with the entity’s expected purchase, sale or usage requirements All of the choices
FASB Statement No. 133 requires that all derivative financial instruments be reported at their: a. Historical cost b. Fair value c. Present value d. Par value
A derivative is a financial instrument whose value is determined by _____________________. (Select two that apply) Select one or more: a. An underlying asset b. The features of the derivative itself c. Speculation d. A regulatory body such as the FTC
With respect to derivative instruments that are designated as hedges, the FASB calls for which of the following general disclosures? a. The objective of using hedging instruments. b. Description of the various types of hedges. c. A description of the types of transactions that are hedged d. All of the above.
Question 15 Which of the following may be classified as a financial asset at fair value through profit or loss? Group of answer choices A derivative All of these A non-derivative equity instrument A non-derivative debt instrument
19. Which of the following may be classified as a financial asset at fair value through profit or loss? Group of answer choices A non-derivative debt instrument All of these A non-derivative equity instrument A derivative
All 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 statement
1. The unrealized gain/loss from investment valuation for trading securities and available-for-sale securities should be reported in: Select one: a. the income statement for both securities. b. the balance sheet statement for both securities. c. the income statement and the balance sheet statement, respectively. d. the balance sheet statement and the income statement, respectively. In applying the fair value option under ASC 825-10-25 (Predecessor literature Statement of Financial Accounting Standards No. 159: The Fair Value Option for Financial Assets and Financial Liabilities), a company Select one: a. has the option to apply the fair value option to its investments classified as securities held-to-maturity and securities-available-for-sale on an instrument-by-instrument basis. b. is required to apply the fair value option to its investments classified as securities held-to-maturity and securities available-for-sale. c. has to apply the fair value…
The notional amount of a derivative instrument is a. related to the number of units specified in the derivative and the price that relates to the asset or liability underlying the derivative. b. the change in the price or rate that relates to the asset or liability underlying the derivative. c. the price or rate that relates to the asset or liability underlying the derivative. d. the number of units that is specified in the derivative instrument.
Which of the following may be classified as a financial asset at fair value through profit or loss a. a non derivative equity instrument b. all of these' c. a derivative d. a non-derivative debt instrument
The fair value of a liability is defined as: a. the appraised value of the liability. b. the price that would be received to assume the liability in an orderly transaction between market participants. c. the amount that would be paid when transferring a liability in an orderly transaction between market participants. d. the carrying amount of the liability on the date of transaction.
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.