1. It is a routine practice for firms to provide investors with information about their financial instruments and derivatives. Whilst this information should aid investors in judging the risk of these instruments and derivatives, research has empirically shown that this is not necessarily effective for a variety of reasons.

REQUIRED:

Discuss the two (2) main reasons outlined by Koonce, Lipe, and McAnally (2005) that impede investors risk judgment of financial instruments and derivatives.

2. IFRS 9 replaced IAS 39 and introduced three main requirements for hedge effectiveness to be met by entities for recognition of hedging.

REQUIRED:

Explain the term hedge effectiveness and the three (3) main requirements for hedge effectiveness under IFRS 9.

3. A financial asset or liability should be recognised when an entity becomes party to the contractual provisions of the instrument.

REQUIRED:

Explain the circumstances under which an entity would derecognise a financial asset or liability and the accounting entries to make on derecognition.