Accounting for Investments, Volume 2: Fixed Income Securities and Interest Rate Derivatives—A Practitioner's Guide

QUESTIONS

Theory questions

1. What is meant by available-for-sale securities? When would you classify an investment as available-for-sale?

2. What are the major differences between trading securities and available-for-sale securities?

3. How is the classification of “available-for-sale” affected with the introduction of IFRS 9?

4. How is the foreign exchange translation impact on available-for-sale bonds treated in the books of accounts? Is this any different from equity securities? If so, explain why it is so.

5. How is the impairment of available-for-sale bonds treated and presented in the balance sheet?

6. How is the unrealized currency gain or loss recorded in the book of accounts?

7. How is the realized capital gain or loss recorded in the book of accounts on the settlement date?

8. Enumerate the significant events in the trade life cycle of an investment classified as an available-for-sale security.

Objective questions

1. Available-for-sale bonds are debt investments that will be held:

a) Until maturity.

b) For a predefined period.

c) Only until the current financial year.

d) For an indefinite period of time.

2. The unrealized gain or loss for available-for-sale bonds is:

a) Recorded as an adjustment to the equity on the balance sheet.

b) Not recorded in the balance sheet.

c) Recorded as earnings in P&L for the current period.

d) Recorded in the other comprehensive income (OCI).

3. When the bonds are sold then the realized gain is recorded in:

a) Other comprehensive ...