Question 1

Which of the following is not an example of a level 2 input?

Accepted Answer

A)  Quoted prices for identical or similar assets or liabilities in markets that are not active. 
B)  Inputs such as interest rates and yield curves, volatilities, prepayment speeds, and credit risks. 
C)  Measuring accounts receivable based on the entity's historical records of recoverability. 
D)  Inputs that are derived from or corroborated by observable market data by correlation or other means. 
A)  Quoted prices for identical or similar assets or liabilities in markets that are not active. 
B)  Inputs such as interest rates and yield curves, volatilities, prepayment speeds, and credit risks. 
C)  Measuring accounts receivable based on the entity's historical records of recoverability. 
D)  Inputs that are derived from or corroborated by observable market data by correlation or other means. C

Question 2

The market with the greatest volume and level of activity for the asset or liability is defined as the:

Accepted Answer

A)  most active market. 
B)  current market. 
C)  principal market. 
D)  most advantageous market. 
A)  most active market. 
B)  current market. 
C)  principal market. 
D)  most advantageous market. C

Question 3

AASB 13 defines exit price as:

Accepted Answer

A)  A transaction that assumes exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities; it is not a forced transaction (e.g. a forced liquidation or distress sale). 
B)  The price that would be received to sell an asset or paid to transfer a liability. 
C)  The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. 
D)  The amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties in an arm's length transaction. 
A)  A transaction that assumes exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities; it is not a forced transaction (e.g. a forced liquidation or distress sale). 
B)  The price that would be received to sell an asset or paid to transfer a liability. 
C)  The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. 
D)  The amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties in an arm's length transaction. B

Question 4

Which of the following disclosures are not required under AASB 13?

Accepted Answer

A)  Quantitative information about all unobservable inputs used in the fair value measurement. 
B)  The valuation techniques used to measure fair value. 
C)  The fair value measurement for each class of asset and liability at the end of the reporting period. 
D)  The input level of the fair value hierarchy within which the fair value measurements are categorised. 
A)  Quantitative information about all unobservable inputs used in the fair value measurement. 
B)  The valuation techniques used to measure fair value. 
C)  The fair value measurement for each class of asset and liability at the end of the reporting period. 
D)  The input level of the fair value hierarchy within which the fair value measurements are categorised.

Question 5

Which of the following is not a characteristic of a market participant under AASB 13?

Accepted Answer

A)  Buyers and sellers that are able to enter into a transaction for the asset or liability. 
B)  Buyers and sellers that are related parties. 
C)  Buyers and sellers that are willing to enter into a transaction for the asset or liability. 
D)  Buyers and sellers that are knowledgeable, having a reasonable understanding about the asset or liability and the transaction using all available information. 
A)  Buyers and sellers that are able to enter into a transaction for the asset or liability. 
B)  Buyers and sellers that are related parties. 
C)  Buyers and sellers that are willing to enter into a transaction for the asset or liability. 
D)  Buyers and sellers that are knowledgeable, having a reasonable understanding about the asset or liability and the transaction using all available information.

Question 6

The following assumptions are made when measuring the fair value of an equity instrument except for:

Accepted Answer

A)  The market participant transferee will take on the rights and responsibilities associated with the instrument. 
B)  An entity's own equity instrument would remain outstanding. 
C)  The instrument would not be cancelled or otherwise extinguished on the measurement date. 
D)  An entity's own equity instruments are transferred to a market participant at transfer date. 
A)  The market participant transferee will take on the rights and responsibilities associated with the instrument. 
B)  An entity's own equity instrument would remain outstanding. 
C)  The instrument would not be cancelled or otherwise extinguished on the measurement date. 
D)  An entity's own equity instruments are transferred to a market participant at transfer date.

Question 7

In measuring an equity instrument at fair value the objective is to estimate an exit price at measurement date from the perspective of:

Accepted Answer

A)  the entity issuing the equity instrument. 
B)  the party planning to repurchase the instrument. 
C)  the party to whom the instrument will be transferred. 
D)  a market participant who holds the instrument as an asset. 
A)  the entity issuing the equity instrument. 
B)  the party planning to repurchase the instrument. 
C)  the party to whom the instrument will be transferred. 
D)  a market participant who holds the instrument as an asset.

Question 8

The following are valuation techniques prescribed by AASB 13 except for:

Accepted Answer

A)  The cost approach. 
B)  The income approach. 
C)  The market approach. 
D)  The fair value approach. 
A)  The cost approach. 
B)  The income approach. 
C)  The market approach. 
D)  The fair value approach.

Question 9

Valuation techniques that reflect the amount that would be required currently to replace the service capacity of an asset is an example of:

Accepted Answer

A)  the fair value approach. 
B)  the income approach. 
C)  the cost approach. 
D)  the market approach. 
A)  the fair value approach. 
B)  the income approach. 
C)  the cost approach. 
D)  the market approach.

Question 10

The fair value of an entity's own equity instruments will be determined under which of the following circumstances?

Accepted Answer

A)  Where the entity participates in a share buy-back. 
B)  Where the entity is preparing for listing. 
C)  Where the entity undertakes a business combination and issues its own equity instruments in exchange for a business. 
D)  Where there is a major change in the shareholding of the entity. 
A)  Where the entity participates in a share buy-back. 
B)  Where the entity is preparing for listing. 
C)  Where the entity undertakes a business combination and issues its own equity instruments in exchange for a business. 
D)  Where there is a major change in the shareholding of the entity.

Question 11

The two most common valuation measures used in Accounting Standards are:

Accepted Answer

A)  Fair value less costs to sell and carrying amount. 
B)  Net realisable value and fair value. 
C)  Value in use and net realisable value. 
D)  Cost and fair value. 
A)  Fair value less costs to sell and carrying amount. 
B)  Net realisable value and fair value. 
C)  Value in use and net realisable value. 
D)  Cost and fair value.

Question 12

Which of the following steps is not relevant when measuring liabilities?

Accepted Answer

A)  The particular liability that is the subject of the measurement. 
B)  The principal (or most advantageous) market for the liability. 
C)  The valuation premise that is appropriate for the measurement. 
D)  The valuation technique(s) appropriate for the measurement. 
A)  The particular liability that is the subject of the measurement. 
B)  The principal (or most advantageous) market for the liability. 
C)  The valuation premise that is appropriate for the measurement. 
D)  The valuation technique(s) appropriate for the measurement.

Question 13

Where a liability is held as a corresponding asset by another entity, the fair value of the liability is determined from the perspective of a market participant that:

Accepted Answer

A)  applies a present value technique to measure the liability. 
B)  applies the cost approach to valuing the liability. 
C)  calculates the amount required to settle the present obligation. 
D)  holds the identical item as an asset at measurement date. 
A)  applies a present value technique to measure the liability. 
B)  applies the cost approach to valuing the liability. 
C)  calculates the amount required to settle the present obligation. 
D)  holds the identical item as an asset at measurement date.

Question 14

Which of the following statements relating to non-performance risk is incorrect?

Accepted Answer

A)  The entity's own credit risk is included. 
B)  The holder of a corresponding asset will not fulfil the obligation. 
C)  The entity will not fulfil the obligation. 
D)  It applies to liabilities. 
A)  The entity's own credit risk is included. 
B)  The holder of a corresponding asset will not fulfil the obligation. 
C)  The entity will not fulfil the obligation. 
D)  It applies to liabilities.

Question 15

The fair value of an equity instrument is based on determining a/an _________ price which may relate to the price paid for an entity to repurchase its shares.

Accepted Answer

A)  entry 
B)  exit 
C)  transfer 
D)  settlement 
A)  entry 
B)  exit 
C)  transfer 
D)  settlement

Question 16

Inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly, are an example of:

Accepted Answer

A)  a Level 1 input. 
B)  a Level 2 input. 
C)  a Level 3 input. 
D)  a Level 4 input. 
A)  a Level 1 input. 
B)  a Level 2 input. 
C)  a Level 3 input. 
D)  a Level 4 input.

Question 17

Fair value is determined as:

Accepted Answer

A)  the current exit price. 
B)  the current entry price. 
C)  a future entry price. 
D)  a future exit price. 
A)  the current exit price. 
B)  the current entry price. 
C)  a future entry price. 
D)  a future exit price.

Question 18

Which of the following is an example of a liability where there is no corresponding asset?

Accepted Answer

A)  A debenture issued by a listed company. 
B)  A mortgage. 
C)  A provision for warranties. 
D)  A provision for decommissioning. 
A)  A debenture issued by a listed company. 
B)  A mortgage. 
C)  A provision for warranties. 
D)  A provision for decommissioning.

Question 19

Which of the following documents issued alongside AASB 13 do not form an integral part of the standard? I Appendix A: Defined terms
II Appendix B: Application guidance
III Basis for Conclusions
IV Illustrative Examples

Accepted Answer

A)  I and II 
B)  II and III 
C)  III and IV 
D)  IV and I 
A)  I and II 
B)  II and III 
C)  III and IV 
D)  IV and I

Question 20

An entity holding both financial assets and liabilities is allowed to offset and determine fair value on the net position as long as: I the entity holds a net short position
II the entity holds a net long position
III the entity has a documented risk management strategy
IV the entity manages the group of net financial assets and liabilities on a net exposure basis

Accepted Answer

A)  I and II. 
B)  I and III. 
C)  II and IV. 
D)  III and IV. 
A)  I and II. 
B)  I and III. 
C)  II and IV. 
D)  III and IV.

Exam 3: Fair Value Measurement

Which of the following is not an example of a level 2 input?

The market with the greatest volume and level of activity for the asset or liability is defined as the:

AASB 13 defines exit price as:

Which of the following disclosures are not required under AASB 13?

Which of the following is not a characteristic of a market participant under AASB 13?

The following assumptions are made when measuring the fair value of an equity instrument except for:

In measuring an equity instrument at fair value the objective is to estimate an exit price at measurement date from the perspective of:

The following are valuation techniques prescribed by AASB 13 except for:

Valuation techniques that reflect the amount that would be required currently to replace the service capacity of an asset is an example of:

The fair value of an entity's own equity instruments will be determined under which of the following circumstances?

The two most common valuation measures used in Accounting Standards are:

Which of the following steps is not relevant when measuring liabilities?

Where a liability is held as a corresponding asset by another entity, the fair value of the liability is determined from the perspective of a market participant that:

Which of the following statements relating to non-performance risk is incorrect?

The fair value of an equity instrument is based on determining a/an _________ price which may relate to the price paid for an entity to repurchase its shares.

Inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly, are an example of:

Fair value is determined as:

Which of the following is an example of a liability where there is no corresponding asset?

Which of the following documents issued alongside AASB 13 do not form an integral part of the standard? I Appendix A: Defined terms II Appendix B: Application guidance III Basis for Conclusions IV Illustrative Examples

Accounting Regulation and the Conceptual Framework

Application of Accounting Theory

Inventories

Property, Plant and Equipment

Intangible Assets

Impairment of Assets

Provisions, Contingent Liabilities and Contingent Assets

Employee Benefits

Leases

Financial Instruments

Income Taxes

Share Capital and Reserves

Share Based Payment

Revenue

Presentation of Financial Statements

Statement of Cash Flows

Accounting Policies and Other Disclosures

Earnings Per Share

Operating Segments

Related Party Disclosures

Sustainability and Corporate Social Responsibility Recording

Foreign Currency Transactions and Forward Exchange Contracts

Translation of Foreign Currency Financial Statements

Business Combinations

Consolidation: Controlled Entities

Consolidation: Wholly Owned Entities

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Associates and Joint Ventures

Joint Arrangements

Insolvency and Liquidation

Accounting for Mineral Resources

Agriculture

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