TRUE OR FALSE / MULTIPLE CHOICE

1. The IASB requires that investments meeting the business model (held-for-collection) and contractual cash flow tests be valued at fair value.

2. The IASB requires that companies classify financial assets into two measurement categories - amortized cost and fair value.

3. Companies measure debt investments at fair value if the objective of the company's business model is to hold the financial asset to collect the contractual cash flows.

4. The legal form of financial instrument, rather than its substance, governs its classification as to whether the instrument is an equity security or debt security.

5. Over the life of a debt investment, interest revenue and the gain on sale are the same using either amortized cost or fair value measurement.

6. The Unrealized Holding Gain or Loss - income account is reported in the other income and expense section of the income statement.

7. All dividends received by an investor from the investee increase the investment's carrying value under the equity method.

8. Radiant Corporation accounts for its investment in the ordinary shares of Sells Company under the equity method. Radiant Corporation should ordinarily record share of net income from Sells as

a. An addition to the carrying value of this investment.

b. A reduction of the carrying value of the investment.

c. Dividend income.

d. Share premium.

9. If the financial asset is held for trading or if the financial asset is measured at fair value through profit or loss, transaction costs directly attribute to the acquisition shall be:

a. included as component of other comprehensive income.

b. deferred and amortized over a reasonable period.

c. expensed immediately when incurred.

d. capitalized as cost of the financial asset.