Classification1. An entity invests in a pool of assets that is managed by aninvestment house. In accordance with the entity's businessmodel, the investment will be held until it matures in 10 years'time, at which date the entity will collect the principal amountin the investment together with the interest earned. Inaccordance with the principles of PFRS 9, the entity will mostlikely measure the investment atc. FVOCI (Mandatory).d. FVOCI (Election).a. Amortized cost.b. FVPL.2. An entity plans to purchase a new machine in a few years'time. The cost of the new machine is significant. To addressthis, the entity invests in debt securities. The entity'sinvestment management strategy is to hold the investmentand collect the investment income in the form of interest.However, when opportunity arises, the entity sells theinvestment in order to realize fair value gain. The entityreinvests any proceeds from sales until the date of purchase ofthe new machine. In accordance with the principles of PFRS 9,the entity will most likely classify the investment assubsequently measured ata. Amortized cost.b. FVPL.c. FVOCI (Mandatory).d. FVOCI (Election).

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Classificati 1 An entity invests in a pool of assets that is managed by an investment house. In accordance with the entity's business model, the investment will be held until it matures in 10 years' time, at which date the entity will collect the principal amount in the investment together with the interest earned. In accordance with the principles of PFRS 9, the entity will most likely measure the investment at a. Amortized cost. c. FVOCI (Mandatory). d. FVOCI (Election). b. FVPL.

Classificati 1 An entity invests in a pool of assets that is managed by an investment house. In accordance with the entity's business model, the investment will be held until it matures in 10 years' time, at which date the entity will collect the principal amount in the investment together with the interest earned. In accordance with the principles of PFRS 9, the entity will most likely measure the investment at a. Amortized cost. c. FVOCI (Mandatory). d. FVOCI (Election). b. FVPL.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Classification
1. An entity invests in a pool of assets that is managed by an
investment house. In accordance with the entity's business
model, the investment will be held until it matures in 10 years'
time, at which date the entity will collect the principal amount
in the investment together with the interest earned. In
accordance with the principles of PFRS 9, the entity will most
likely measure the investment at
c. FVOCI (Mandatory).
d. FVOCI (Election).
a. Amortized cost.
b. FVPL.
2. An entity plans to purchase a new machine in a few years'
time. The cost of the new machine is significant. To address
this, the entity invests in debt securities. The entity's
investment management strategy is to hold the investment
and collect the investment income in the form of interest.
However, when opportunity arises, the entity sells the
investment in order to realize fair value gain. The entity
reinvests any proceeds from sales until the date of purchase of
the new machine. In accordance with the principles of PFRS 9,
the entity will most likely classify the investment as
subsequently measured at
a. Amortized cost.
b. FVPL.
c. FVOCI (Mandatory).
d. FVOCI (Election).

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