Question 1

Which of the following is an indication of an active market?

Accepted Answer

A)  there are few recent transactions 
B)  price quotations vary substantially over time 
C)  price quotations vary substantially among market-makers 
D)  price quotations are based on current market information. 
A)  there are few recent transactions 
B)  price quotations vary substantially over time 
C)  price quotations vary substantially among market-makers 
D)  price quotations are based on current market information. D

Question 2

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

Question 3

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

Accepted Answer

A)  the valuation techniques used to measure fair value 
B)  the inputs used to measure fair value 
C)  the level of the fair value hierarchy within which the fair value measurements are categorised 
D)  quantitative information about all unobservable inputs used in the fair value measurement 
A)  the valuation techniques used to measure fair value 
B)  the inputs used to measure fair value 
C)  the level of the fair value hierarchy within which the fair value measurements are categorised 
D)  quantitative information about all unobservable inputs used in the fair value measurement D

Question 4

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

Question 5

Which of the following disclosure are required under AASB 13?

Accepted Answer

A)  the valuation techniques used to measure fair value 
B)  the level of the fair value hierarchy within which the fair value measurements are categorised 
C)  quantitative information about the significant unobservable inputs used in the fair value measurement 
D)  all of the options are correct. 
A)  the valuation techniques used to measure fair value 
B)  the level of the fair value hierarchy within which the fair value measurements are categorised 
C)  quantitative information about the significant unobservable inputs used in the fair value measurement 
D)  all of the options are correct.

Question 6

Which of the following is not one of the key reasons given by the IASB for issuing a standard on fair value measurement?

Accepted Answer

A)  to establish a single source of guidance for all fair value measurements required or permitted by IFRSs to reduce complexity and improve consistency in their application; 
B)  to clarify the definition of fair value and related guidance in order to communicate the measurement objective more clearly; 
C)  to require the use of fair value when accounting for all non-financial assets 
D)  to enhance disclosures about fair value to enable users of financial statements to assess the extent to which fair value is used and to inform them about the inputs used to derive those fair values. 
A)  to establish a single source of guidance for all fair value measurements required or permitted by IFRSs to reduce complexity and improve consistency in their application; 
B)  to clarify the definition of fair value and related guidance in order to communicate the measurement objective more clearly; 
C)  to require the use of fair value when accounting for all non-financial assets 
D)  to enhance disclosures about fair value to enable users of financial statements to assess the extent to which fair value is used and to inform them about the inputs used to derive those fair values.

Question 7

In which circumstance will it be necessary to determine the fair value of an entity's own equity instruments?

Accepted Answer

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

Question 8

Trademarks would be measured primarily using which type of inputs?

Accepted Answer

A)  Level 1 inputs 
B)  Level 2 inputs 
C)  Level 3 inputs 
D)  Level 4 inputs 
A)  Level 1 inputs 
B)  Level 2 inputs 
C)  Level 3 inputs 
D)  Level 4 inputs

Question 9

At which date is fair value determined?

Accepted Answer

A)  the measurement date 
B)  the settlement date 
C)  the transaction date 
D)  the exchange date 
A)  the measurement date 
B)  the settlement date 
C)  the transaction date 
D)  the exchange date

Question 10

Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date are an example of:

Accepted Answer

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

Question 11

Non-performance risk refers to the risk that:

Accepted Answer

A)  a market participant will not fulfil an obligation 
B)  the holder of the liability will not fulfil an obligation 
C)  the counterparty will not fill an obligation 
D)  the holder of a corresponding asset will not fulfil an obligation. 
A)  a market participant will not fulfil an obligation 
B)  the holder of the liability will not fulfil an obligation 
C)  the counterparty will not fill an obligation 
D)  the holder of a corresponding asset will not fulfil an obligation.

Question 12

Which of the following is the definition of exit price per AASB 13?

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 (eg a forced liquidation or distress sale). 
B)  The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction 
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 price that would be received to sell an asset or paid to transfer a liability. 
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 (eg a forced liquidation or distress sale). 
B)  The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction 
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 price that would be received to sell an asset or paid to transfer a liability.

Question 13

Which of the following is not assumed when measuring the fair value of an equity instrument?

Accepted Answer

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

Question 14

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

Accepted Answer

A)  active market 
B)  principal market 
C)  liquid market 
D)  most advantageous market 
A)  active market 
B)  principal market 
C)  liquid market 
D)  most advantageous market

Question 15

Which of the following is the definition of fair value per AASB 13?

Accepted Answer

A)  The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction 
B)  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. 
C)  The price that would be received to sell an asset or paid to transfer a liability. 
D)  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 (eg a forced liquidation or distress sale). 
A)  The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction 
B)  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. 
C)  The price that would be received to sell an asset or paid to transfer a liability. 
D)  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 (eg a forced liquidation or distress sale).

Question 16

Where a market has both a bid and an ask process, the price used in measuring fair value is:

Accepted Answer

A)  the bid price 
B)  the ask price 
C)  the bid-ask spread 
D)  the most representative price for the transaction. 
A)  the bid price 
B)  the ask price 
C)  the bid-ask spread 
D)  the most representative price for the transaction.

Question 17

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

Accepted Answer

A)  a provision for decommissioning 
B)  a debenture issued by a listed company 
C)  a loan owing to a financial institution 
D)  a provision for warranties. 
A)  a provision for decommissioning 
B)  a debenture issued by a listed company 
C)  a loan owing to a financial institution 
D)  a provision for warranties.

Question 18

An entity holding both financial assets and liabilities is allowed to offset and determine fair value on the net position as long as:
I they hold a net long position
II they hold a net short position
III they have a documented risk management strategy
IV the manage the group of net financial assets and liabilities on a net exposure basis
V transactions are conducted in an orderly market

Accepted Answer

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

Question 19

Valuation techniques that convert future amounts to a single current amount and determines the fair value on the basis of the value indicated by current market expectations about those future amounts 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 20

Which are the two most common measures used in Accounting Standards?

Accepted Answer

A)  fair value less costs to sell and cost 
B)  value in use and cost 
C)  cost and fair value 
D)  net realisable value and fair value. 
A)  fair value less costs to sell and cost 
B)  value in use and cost 
C)  cost and fair value 
D)  net realisable value and fair value.

Exam 4: Fair Value Measurement

Which of the following is an indication of an active market?

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.

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

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

Which of the following disclosure are required under AASB 13?

Which of the following is not one of the key reasons given by the IASB for issuing a standard on fair value measurement?

In which circumstance will it be necessary to determine the fair value of an entity's own equity instruments?

Trademarks would be measured primarily using which type of inputs?

At which date is fair value determined?

Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date are an example of:

Non-performance risk refers to the risk that:

Which of the following is the definition of exit price per AASB 13?

Which of the following is not assumed when measuring the fair value of an equity instrument?

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

Which of the following is the definition of fair value per AASB 13?

Where a market has both a bid and an ask process, the price used in measuring fair value is:

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

Valuation techniques that convert future amounts to a single current amount and determines the fair value on the basis of the value indicated by current market expectations about those future amounts is an example of:

Which are the two most common measures used in Accounting Standards?

Accounting Regulation and the Conceptual Framework

Application of Accounting Theory

Shareholders Equity: Share Capital and Reserves

Revenue

Provisions, Contingent Liabilities and Contingent Assets

Income Taxes

Financial Instruments

Share-Based Payments

Translation of the Financial Statements of Foreign Entities

Employee Benefits

Inventories

Property, Plant and Equipment

Leases

Understanding Australian Accounting Standards

Impairment of Assets

Accounting for Mineral Resources

Agriculture

Financial Statement Presentation

Statement of Cash Flows

Earnings Per Share

Operating Segments

Operating Segments

Business Combinations

Consolidation: Principles and Accounting Requirements

Consolidation: Intragroup Transactions

Consolidation: Non Controlling Interest

Joint Arrangements

Associates and Joint Ventures

Filters