PSBA Integrated Review

Financial Accounting and Reporting – Theory Christian Aris Valix

Impairment of financial assets

1. When measuring expected credit losses, an entity should consider

a. Probability-weighted outcome
b. Time value of money
c. Reasonable and supportable information
d. All of the above

2. Cash shortfall is the difference between contractual cash flows that are due to the entity and

a. The fair value of the financial asset

b. The expected cash flows to be received by the same entity
c. The future contractual cash flows to be received by the same entity
d. The carrying amount of the financial asset

3. In computing the impairment loss, what is the discount rate to be used?

a. The prevalent market interest rate

b. The interest rate of government bonds
c. The original effective interest rate
d. The interest rate of high-quality corporate bonds

4. The following financial assets are subject to impairment, except

a. Debt investments measured at amortized cost

b. Debt investments measured at FVOCI
c. Lease receivables
d. Debt investments measured at FVPL

5. What is the prescribed presentation of impairment for financial assets measured at amortized
cost according to PFRS 9?

a. Impairment is presented through an allowance (valuation) account

b. Impairment is presented as a noncurrent liability
c. Impairment is presented as direct deduction to retained earnings
d. Impairment is presented as direct deduction from the asset

6. Which of the following is false about “Stage 1” impairment?

a. Debt instruments have not declined significantly since initial recognition or have low
credit risk
b. Recognize 12-month expected credit loss
c. Interest income is computed based on gross carrying amount of the debt instrument
d. Interest income is computed based on the carrying amount of the debt instrument, net of
allowance for credit loss
7. Which of the following is false about “Stage 2” impairment?

a. Debt instruments have declined significantly in credit quality since initial recognition but
no objective evidence of impairment
b. Debt instruments that have objective evidence of impairment
c. Recognize lifetime expected credit loss
d. Interest income is computed based on gross carrying amount of the debt instrument

8. Which of the following is false about “Stage 3” impairment?

a. Debt instruments have objective evidence of impairment

b. Recognize lifetime expected credit loss
c. Interest income is computed based on gross carrying amount of the debt instrument
d. Interest income is computed based on the carrying amount of the debt instrument, net of
allowance for credit loss

9. There is a rebuttable presumption that there is a significant increase in credit risk if

contractual payments of the financial asset are past due for how many days?

a. More than 30 days

b. More than 60 days
c. More than 90 days
d. More than 12 months

10. Which of the following is false about simplifications to the three-stage impairment model?

a. Lifetime expected credit losses shall be recognized for trade receivables and contract
assets of less than one year or those that do not have a significant financing component
b. Allowed to choose lifetime expected credit losses for trade receivables and contract assets
which contain a significant financing component
c. Allowed to choose lifetime expected credit losses for lease receivables
d. Need to assess if there is a significant decline in credit quality

END