Question bank — IAS 32 — Financial Instruments: Presentation
68 questions in FR/EN/ES, scored by the real scoring engine.
The financial instrument: one contract, two positions3 questions
- Alpha Bank subscribes to an issue of bonds by Beta SA. The issue contract is a financial asset for Alpha and a financial liability for Beta: each party reads it from its own side.True / falseL1
- Which sentence correctly defines a financial instrument under IAS 32?Single choiceL1
- A trainee summarises the definition of a financial instrument for a loan granted by Sora SA to Terra SA. Which of the trainee's sentences is wrong?Single choiceL1
The financial asset, seen from the holder's side3 questions
- Omega SA has to pay 40,000 to a supplier for a delivery already received. In Omega's accounts, this payable is a financial asset, since the contract relates to cash.True / falseL1
- Élodie SA invests 100,000 in bonds issued by another company. How is this investment classified in Élodie's accounts?Single choiceL1
- Which statements about the financial asset are correct? Several answers are possible.Multiple choiceL1
The financial liability, seen from the issuer's side3 questions
- A contractual obligation to deliver cash to another entity is an element that characterises a financial liability, assessed from the issuer's point of view.True / falseL1
- Zéphyr SA, whose functional currency is the euro, enters into a forward contract with a bank under which it will have to exchange USD 2,000,000 for euros at a rate fixed today (case facts). At the reporting date, the market rate may be more or less favourable to Zéphyr. Which element of the contract fits the definition of a financial liability?Single choiceL2
- An internal manual summarises the notion of financial liability. Which of these sentences is wrong?Single choiceL1
The equity instrument: no obligation3 questions
- An issued share is an equity instrument as soon as it is called a share, whatever its redemption terms.True / falseL1
- Which condition must be met for an issued instrument to be an equity instrument?Single choiceL1
- Ambre SA issues 10,000 perpetual securities for 1,000,000. Contract terms (case facts): no redemption date, no right of redemption for the holder; the dividend is paid only if the general meeting of Ambre so decides, and Ambre has no obligation to decide so. How does Ambre classify these securities at issue?Single choiceL2
The contract requirement: written or not, but not a tax2 questions
- An oral agreement, with no written document signed by the parties, cannot be a contract within the meaning of IAS 32.True / falseL1
- Sigma SA lists its obligations at 31 December to assess which are financial liabilities (case facts). Which of these obligations is not a financial liability, because it is not contractual?Single choiceL2
Transactions excluded from IAS 322 questions
- Orme SA has set up a share option plan for its employees. To cover the plan, it buys back 20,000 of its own shares on the market (case facts). What treatment applies to this repurchase of treasury shares?Single choiceL2
- Which items are among those that the standard excludes in principle from its scope, subject to the exceptions it provides? Several answers are possible.Multiple choiceL2
Contracts on non-financial items that can be settled net1 question
The contractual obligation to deliver cash3 questions
- An instrument that imposes on the issuer a delivery of cash that it cannot avoid is a financial liability, even if the issuer presents it as an ownership security.True / falseL1
- Aube SA issues 50,000 preference shares at 20 each, or 1,000,000. The contract (case facts) requires Aube to redeem them in cash, at 20 each, five years after issue, with no possibility of refusing. How does Aube classify these shares at issue?Single choiceL2
- Brume SA issues perpetual securities with a total nominal value of 2,000,000 and no redemption date. The contract obliges Brume to pay each year a fixed coupon of 5% of the nominal value, with no possibility of suspending or deferring it (case facts). Write a short justification of the classification at issue, distinguishing rule, case facts and conclusion.JudgmentL2
The unconditional right to avoid delivery3 questions
- Hélix SA issues securities that the contract obliges it to redeem in cash if the national stock index falls by 30% in a year. The event is outside the control of both Hélix and the holders, and the contract contains no clause allowing it to refuse this redemption (case facts). How does it classify these securities at issue?Single choiceL2
- A reviewer comments on the classification of redeemable shares issued by entities. Which of the reviewer's statements is wrong?Single choiceL3
- Two co-operatives issue members' shares that each member may ask to have redeemed. Co-operative Verger: its statutes allow the board to refuse any redemption, at its discretion and without condition. Co-operative Sillon: its statutes allow the board to refuse redemption only when its liquidity ratio falls below a set threshold (case facts). Write a short note that classifies the shares of each co-operative and justifies the difference, distinguishing rule, case facts and professional judgement.JudgmentL3
Fixed-for-fixed: the own-shares test3 questions
- Iris SA, whose functional currency is the euro, issues a warrant to an investor: if the holder exercises it, Iris will deliver 10,000 of its own shares against a payment of 120,000 euros. The number of shares and the price are fixed in the contract and do not vary; settlement is by physical delivery (case facts). How does Iris classify this warrant?Single choiceL2
- An analyst comments on the fixed-for-fixed condition applicable to contracts settled in the issuer's own equity instruments. Which of the analyst's statements is wrong?Single choiceL3
- Which statements about the fixed-for-fixed condition are correct? Several answers are possible.Multiple choiceL2
Contingent settlement clauses2 questions
Settlement options2 questions
- Opale SA enters into a derivative on its own shares with a bank. At maturity, the bank chooses either to receive 5,000 Opale shares against a payment of 100,000 euros, or a net cash settlement of the difference between the value of the shares and 100,000 euros (case facts). How is this derivative classified?Single choiceL2
- A colleague drafts conclusions on the classification of derivatives on own equity instruments with a settlement option. Which of these conclusions is wrong?Single choiceL3
Foreign currency price and rights offered pro rata1 question
Instruments puttable by the holder: the exception1 question
Obligations that arise only on liquidation1 question
Comparing the two exceptions1 question
Members' shares in a cooperative (IFRIC 2)1 question
Splitting a compound instrument at inception3 questions
- An interest-bearing bond convertible into a fixed number of the issuer's shares is split at initial recognition into a liability component and an equity component, recognised separately.True / falseL1
- A colleague summarises the treatment of an interest-bearing bond convertible into a fixed number of shares. Which of the colleague's sentences is wrong?Single choiceL1
- Cyan SA issues bonds convertible into a fixed number of shares for total proceeds of …, received on the issue date. Case data: the fair value of a similar liability without a conversion option, which measures the liability component, is …. Record the issue entry for the convertible bonds.Journal entryL3
The liability first, equity as the residual3 questions
- Dalia SA issues on 1 January, at par, bonds convertible into a fixed number of shares: proceeds of …, repayment at par in …, annual coupon of … paid at the end of each year. Case data, from management's judgement: a similar debt without a conversion option would be issued at a rate of … (a rate not imposed by the standard). Calculate, one flow at a time, the present value of the principal and of each of the three coupons, then the liability component and the residual equity component.CalculationL3
- A colleague describes the steps of the initial split of a convertible bond. Which of the colleague's sentences is wrong?Single choiceL2
- Opéra SA issues bonds convertible into a fixed number of shares, with a 3% coupon. Case facts: an ordinary loan of the same term and ranking and with no conversion option would be financed at 6.5%; the risk-free rate is 2%; shareholders expect a return of 11%. Which rate does management use to discount the cash flows of the liability component?Single choiceL3
No gain or loss on issue3 questions
- A working paper comments on the issue of a convertible bond. Which of its conclusions is wrong?Single choiceL2
- Mira SA issues bonds convertible into a fixed number of shares for proceeds of …. The fair value of a similar liability without a conversion option, which measures the liability component, is … (case data). Calculate the equity component, then the gain or loss recognised at issue.CalculationL2
- For an issue of convertible bonds of 600,000, whose liability component is 520,000 (case data), a trainee proposes the following entry: debit Cash 600,000; credit Debt 520,000; credit Finance income 80,000. Write a short justification stating whether this entry is acceptable, distinguishing rule, case facts and correction.JudgmentL2
Conversion at maturity2 questions
- Zola SA issued convertible bonds. At maturity, all the holders exercise their conversion right. At that date, the carrying amount of the liability component is …; the original equity component is … (case data). Rule of the standard: on conversion, the carrying amount of the liability is reclassified to equity, with no gain or loss, and the original equity component remains in equity. Record the conversion entry.Journal entryL2
- Lux SA issued convertible bonds. At the start of the last year, the carrying amount of the liability component is …; the effective interest rate is … and the coupon paid at the end of the year is …. The original equity component is … (case data). At maturity, all the holders convert. Rule of the standard: the liability is reclassified to equity at its carrying amount and the original component stays in equity. Calculate the carrying amount of the liability on conversion, then the total equity attributable to the instrument after conversion.CalculationL3
Interest charge and coupons of the liability component1 question
Treasury shares3 questions
- When an entity resells its own shares at a price higher than their repurchase cost, it recognises the difference as a gain in profit or loss for the year.True / falseL1
- Rhône SA had repurchased 5,000 of its own shares for a total cost of …. It resells them on the market for proceeds of …. Case convention: the difference is recorded under the caption "share capital and share premium". Calculate the amount of the resale difference.CalculationL2
- Tilde SA buys back 6,000 of its own shares on the market for a total price of …, paid in cash. Record the repurchase entry.Journal entryL2
Interest and dividends: classification decides3 questions
- Dividends on a share classified as a financial liability are recognised in profit or loss, whereas distributions to holders of an equity instrument are recognised directly in equity.True / falseL1
- Pavot SA has two classes of shares: ordinary shares, which are equity instruments, and preference shares redeemable in cash on a fixed date, classified as a financial liability (case facts). The general meeting decides a dividend of 40,000 on the ordinary shares and of 25,000 on the preference shares. How does Pavot account for these two dividends?Single choiceL3
- Ondine SA has issued preference shares with a total nominal value of …, classified as a financial liability. The contract sets an annual dividend of … of the nominal, due for the year and not yet paid (case data). Record the entry for the dividend of the year.Journal entryL3
The tax effect of distributions (reference to IAS 12)1 question
Equity issue costs2 questions
- Cèdre SA issues new shares for gross proceeds of …. It incurs … of brokerage, legal advice and registration costs, directly attributable to the issue and that would have been avoided without it, and … of corporate communication costs with no direct link to the issue (case data). No tax effect is to be taken into account (case data). Calculate the net amount recorded in equity after the issue.CalculationL2
- An accountant comments on the treatment of the costs of an issue of new shares. Which of the accountant's statements is wrong?Single choiceL2
The two offsetting criteria3 questions
- A financial asset and a financial liability with the same counterparty are presented at their net amount as soon as the entity has a legally enforceable right to set them off, even without an intention to settle on a net basis.True / falseL1
- Pivoine SA has, with Cobalt SA, a receivable of 300,000 and a payable of 280,000. A contract gives it the currently legally enforceable right to set off these amounts. Pivoine nevertheless settles its receivables and payables with Cobalt separately, on different dates, and has no intention either of settling on a net basis or of realising the asset and settling the liability simultaneously (case facts). How does Pivoine present these two amounts?Single choiceL3
- Mistral SA has two counterparties. With A: a receivable of … and a payable of …, with a currently legally enforceable right of set-off and the intention to settle on a net basis. With B: a receivable of … and a payable of …, but the right of set-off is contingent on a future event (case facts). Calculate the net amount presented for A, then the total of the financial assets presented for A and B.CalculationL3
The legally enforceable right of set-off2 questions
- Jade SA holds a deposit of 500,000 with the bank Terra and a loan of 480,000 from the same bank. The agreement between Jade and Terra gives Jade the right to set off these amounts only in the event of default by Terra or Jade (case facts). Jade intends to settle on a net basis. Is the criterion of a legally enforceable right of set-off met?Single choiceL2
- A working paper analyses the criterion of a legally enforceable right of set-off. Which of its conclusions is wrong?Single choiceL3
The intention to settle net1 question
The link with IFRS 9: classify or measure2 questions
- A compound instrument has just been issued. Which sentence correctly describes the split of roles between IAS 32 and IFRS 9 in respect of it?Single choiceL2
- A closing file comments on the subsequent accounting for a convertible bond that has already been split. Which of its conclusions is wrong?Single choiceL3