14 - Disclosures

Objective Questions

1. When securities are transferred from trading securities to available-for-sale, then
a. Gain/loss recognized as unrealized should be reversed.
b. Gain/loss recognized as unrealized should not be reversed.
c. Gain/loss recognized as unrealized will be adjusted with other comprehensive income.
d. None of the above.

2. When securities are transferred from available-for-sale to trading, then
a. Unrealized gain/loss will be transferred from other comprehensive income and treated as income.
b. Unrealized gain/loss should not be reversed.
c. No changes are required at all.
d. None of the above.

3. Impairment other than temporary in respect of equity securities should be
a. Written down to fair value.
b. Treated alike as temporary impairment.
c. Written as a loss to be treated as temporary.
d. None of the above.

4. A stock dividend declared should be treated as
a. Income.
b. Increase in the value of original shares held.
c. Increase to the quantity (position) of shares held.
d. All of the above.

5. For securities classified as available-for-sale, which of the following items will be reported in the income statement of current period?
a. Both realized and unrealized gains.
b. Realized gain alone.
c. Unrealized gain alone.
d. None of the above.

6. For income tax purposes, unrealized gain/loss will be recognized for reporting
a. Automatically at the end of financial year.
b. Only if the securities are liquidated and realized.
c. As and when depending upon the corporate action.
d. None of the above.

7. Unrealized gain/loss included in the income/other comprehensive income represents
a. Temporary difference recognized as deferred tax benefits.
b. Permanent difference recognized as deferred tax benefits.
c. No effect.
d. None of the above.

8. For available-for-sale securities, the deferred tax effect should be presented in
a. The income statement.
b. Other comprehensive income.
c. No need for accounting.
d. None of the above.

9. For trading securities, the deferred tax effect should be presented in
a. The income statement.
b. Other comprehensive income.
c. No need for accounting.
d. None of the above.

10. As per U.S. GAAP, changes in fair value for available-for-sale securities are reported in
a. The income statement.
b. Other comprehensive income.
c. No need to report.
d. None of the above.

11. When the equity securities are transferred from available-for-sale (AFS) to trading securities,
a. The unrealized gain/loss is recognized on T + 2.
b. The unrealized gain/loss is not recognized at all.
c. The realized gain/loss is recognized immediately.
d. The unrealized gain/loss is recognized immediately.
e. Realized gain/loss of trading securities is treated in the same way as in AFS.

12. Shares received as stock dividend should be added to the original shares and when the mark-to-market process is performed the impact of the stock dividend
a. Should be treated as unrealized gains and reported as income for the period.
b. Should be treated as dividend income.
c. Should be treated as dividend income but should be shown as current asset on asset side of balance sheet.
d. Should be treated as realized gain/income for the period.
e. Both b and c.

13. As per the definition in FAS 109, the tax effects of all temporary differences arising from unrealized gain/loss are to be recognized in the financial statements as
a. Non-trading income.
b. Items exempted from taxes.
c. Deferred tax benefits or deferred tax liabilities.
d. Not recognized for current period, but carried forward to the next accounting period.
e. Income or expense for current period.

14. As per FAS 115, under U.S. GAAP, for securities classified as available-for-sale, all reporting enterprises shall disclose
a. Aggregate fair value.
b. Gross unrealized holding gains.
c. Gross unrealized holding losses.
d. All of the above.
e. None of the above.

15. For regular-way contracts, the IASB gives the option to follow either trade date accounting or settlement date accounting, provided it is followed consistently for purchases and sales of financial assets in the same category. This accounting standard is as per
a. U.S. GAAP (generally accepted accounting principles).
b. FASB (Financial Accounting Standards Board).
c. IFRS (International Financial Reporting Standards).
d. GASB (Governmental Accounting Standards Board).
e. IASC (International Accounting Standards Committee).

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