QUESTION 1:

In accordance with AASB 9, the recognition of a financial asset or financial liability

will be influenced by considerations as to whether there is a contractual right to exchange

financial assets or financial liabilities with another entity under conditions that are

potentially favourable, or potentially unfavourable, to the entity. Explain what this

requirement means.

QUESTION 2:

Is there a consequence for reported profit or loss if a particular financial

instrument, for example, a preference share, is designated as debt rather than equity?

Explain the consequence.