Question 1

Where a foreign exchange dealer is willing to exchange one currency for another,the price that should be 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 2

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

Accepted Answer

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

Question 3

Accounts receivable would be measured primarily using which level 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 4

A valuation technique that reflects the amount that would be currently required to replace the service capacity of an asset is known as:

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 5

When valuing a liability and a corresponding asset is not held by another entity,the fair value is typically determined by applying a present value technique.

Accepted Answer

A) True 
 B)False

Question 6

Price per square metre for a building derived from observable market data is an example of a level 2 input.

Accepted Answer

A) True 
 B)False

Question 7

The date at which fair value is determined is known as the:

Accepted Answer

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

Question 8

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 an initial public offering of shares. 
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 the entity makes a right issue of shares to existing shareholders. 
A) Where the entity is preparing for an initial public offering of shares. 
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 the entity makes a right issue of shares to existing shareholders.

Question 9

When determining the fair value of an asset,its fair value is measured by considering its:

Accepted Answer

A) highest and current use. 
B) proposed use. 
C) highest and best use. 
D) value in exchange. 
A) highest and current use. 
B) proposed use. 
C) highest and best use. 
D) value in exchange.

Question 10

Which of the following steps in not relevant when valuing liabilities?

Accepted Answer

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

Question 11

According to AASB 13 Fair Value Measurement which of the following should first be used when measuring the corresponding asset for a liability?

Accepted Answer

A) An income approach 
B) The quoted price of the asset in an active market 
C) The quoted price for the asset in a market that is not active 
D) A market approach 
A) An income approach 
B) The quoted price of the asset in an active market 
C) The quoted price for the asset in a market that is not active 
D) A market approach

Question 12

According to AASB 13 Fair Value Measurement,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 they 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 13

The fair value hierarchy prioritises inputs into how many levels?

Accepted Answer

A) One level 
B) Two levels 
C) Three levels 
D) Four levels 
A) One level 
B) Two levels 
C) Three levels 
D) Four levels

Question 14

One of the key reasons for issuing AASB 13 Fair Value Measurement was 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.

Accepted Answer

A) True 
 B)False

Question 15

AASB 13 Fair Value Measurement defines fair value as:

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 (e.g.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 (e.g.a forced liquidation or distress sale).

Question 16

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 17

Non-performance risk refers to the risk that:

Accepted Answer

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

Question 18

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 assets and liabilities. 
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 assets and liabilities. 
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 19

AASB 13 Fair Value Measurement states that the price within a bid-ask spread that is most representative of fair value should be used to measure fair value.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 5: Fair Value Measurement

Where a foreign exchange dealer is willing to exchange one currency for another,the price that should be used in measuring fair value is:

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

Accounts receivable would be measured primarily using which level of inputs?

A valuation technique that reflects the amount that would be currently required to replace the service capacity of an asset is known as:

When valuing a liability and a corresponding asset is not held by another entity,the fair value is typically determined by applying a present value technique.

Price per square metre for a building derived from observable market data is an example of a level 2 input.

The date at which fair value is determined is known as the:

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

When determining the fair value of an asset,its fair value is measured by considering its:

Which of the following steps in not relevant when valuing liabilities?

According to AASB 13 Fair Value Measurement which of the following should first be used when measuring the corresponding asset for a liability?

The fair value hierarchy prioritises inputs into how many levels?

One of the key reasons for issuing AASB 13 Fair Value Measurement was 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.

AASB 13 Fair Value Measurement defines fair value as:

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

Non-performance risk refers to the risk that:

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

AASB 13 Fair Value Measurement states that the price within a bid-ask spread that is most representative of fair value should be used to measure fair value.

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

Nature and Regulation of Companies

Financing Company Operations

Company Operations

Fundamental Concepts of Corporate Governance

Accounting for Company Income Tax

Financial Instruments

Foreign Currency Transactions and Forward Exchange Contracts

Property, Plant and Equipment

Leases

Intangible Assets

Business Combinations

Impairment of Assets

Disclosure: Legal Requirements and Accounting Polices

Disclosure: Presentation of Financial Statements

Disclosure: Statement of Cash Flows

Disclosure: Translation of Financial Statements Into a Presentation Currency

Consolidation: Controlled Entities

Consolidation: Wholly Owned Subsidiaries

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Associates and Joint Ventures

Investments in Joint Arrangements

Insolvency and Liquidation

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