ADVANCED ACCOUNTING LATEST EVALUATION
QUESTIONS AND ANSWERS SURE A+
✔✔To qualify for hedge accounting, a foreign currency derivative must be used to
hedge a - ✔✔Fair value exposure to foreign exchange risk.
Cash flow exposure to foreign exchange risk.
✔✔A derivative financial instrument such as a foreign currency forward contract is
carried on the balance sheet at its ______ value. - ✔✔fair
✔✔Hedges of recognized foreign currency denominated assets and liabilities can be
designated as a - ✔✔Fair value hedge.
Cash flow hedge.
✔✔An unrealized foreign exchange gain on a foreign currency account receivable that
results from an appreciation in the foreign currency from the date of sale to the balance
sheet date is - ✔✔recognized in net income
✔✔Foreign currency payables and receivable must be ________ at the balance sheet
date to reflect changes in foreign exchange rates. - ✔✔revalued
✔✔The cumulative change in fair value of a hedging instrument used to hedge a
forecasted foreign currency denominated transaction is transferred from accumulated
other comprehensive income to net income on the date that - ✔✔the forecasted
transaction was originally projected to occur
✔✔A decrease in the direct quote in U.S. dollars for a foreign currency from one day to
the next means that the foreign currency has _______ against the U.S. dollar. -
✔✔depreciated
✔✔an enterprise enters into a forward contract to hedge the foreign exchange risk
associated with an account payable in a foreign currency. To be considered highly
effective the forward contract should - ✔✔Be denominated in the same foreign currency
as the account payable.
Be for the same number of foreign currency units as the account payable.
Have a settlement date that is the same as the due date of the account payable.
✔✔An option's premium is determinded by adding the intrinsic value and the ________
value of the option. - ✔✔time
✔✔In accounting for a foreign currency borrowing, both the note payable and any
accrued interest payable on the note are - ✔✔Exposed to foreign exchange risk.
Revalued for changes in the foreign exchange rate.
, ✔✔A transaction exposure to foreign exchange risk exists when an exporter - ✔✔Allows
a foreign customer to pay in a foreign currency and allows the customer time to pay for
its purchases.
✔✔The types of derivatives most commonly used to hedge foreign exchange risk are -
✔✔Foreign currency option.
Foreign currency forward contracts.
✔✔When a derivative financial instrument is used to hedge a foreign currency firm
commitment, the firm commitment - ✔✔Is recognized as an asset or liability at its fair
value.
✔✔The premium paid to acquire a foreign currency option is determinded by adding
together the option's ______ value and its time value - ✔✔intrinsic
✔✔A company accrues interest payable on a foreign currency borrowing at the end of
the year. When the foreign currency-denominated interest is paid, the difference in the
amount of accrued interest and the amount actually paid resulting from a change in the
exchange rate should be recognized as - ✔✔A foreign exchange gain or loss
✔✔As time passes, the time value of a foreign currency option - ✔✔decreses
✔✔An unrealized foreign exchange loss on a foreign currency account receivable that
results from a depreciation in the foreign currency from the date of sale to the balance
sheet date is - ✔✔recognized in net income
✔✔The number of foreign currency units that can be purchased with one U.S. dollar is
_______ quote for that foreign currency. - ✔✔indirect
✔✔The fair value of a foreign currency forward contract is determined by reference to -
✔✔changes in the forward rate over the life of the forward contract.
✔✔The time value of a foreign currency option ______ as time passes - ✔✔decreases
✔✔The accounting for foreign currency hedges can differ between IFRS and U.S.
GAAP with regard to - ✔✔The recognition of changes in the fair value of forward
contracts used as fair value hedges.
The types of financial instruments allowed to be designated as cash flow hedges.
The timing of recognition of an option's time value as expense in net income.
✔✔When the forward rate for a foreign currency is lower than its spot rate on a given
date the foreign currency is selling at - ✔✔a discount in the forward market
QUESTIONS AND ANSWERS SURE A+
✔✔To qualify for hedge accounting, a foreign currency derivative must be used to
hedge a - ✔✔Fair value exposure to foreign exchange risk.
Cash flow exposure to foreign exchange risk.
✔✔A derivative financial instrument such as a foreign currency forward contract is
carried on the balance sheet at its ______ value. - ✔✔fair
✔✔Hedges of recognized foreign currency denominated assets and liabilities can be
designated as a - ✔✔Fair value hedge.
Cash flow hedge.
✔✔An unrealized foreign exchange gain on a foreign currency account receivable that
results from an appreciation in the foreign currency from the date of sale to the balance
sheet date is - ✔✔recognized in net income
✔✔Foreign currency payables and receivable must be ________ at the balance sheet
date to reflect changes in foreign exchange rates. - ✔✔revalued
✔✔The cumulative change in fair value of a hedging instrument used to hedge a
forecasted foreign currency denominated transaction is transferred from accumulated
other comprehensive income to net income on the date that - ✔✔the forecasted
transaction was originally projected to occur
✔✔A decrease in the direct quote in U.S. dollars for a foreign currency from one day to
the next means that the foreign currency has _______ against the U.S. dollar. -
✔✔depreciated
✔✔an enterprise enters into a forward contract to hedge the foreign exchange risk
associated with an account payable in a foreign currency. To be considered highly
effective the forward contract should - ✔✔Be denominated in the same foreign currency
as the account payable.
Be for the same number of foreign currency units as the account payable.
Have a settlement date that is the same as the due date of the account payable.
✔✔An option's premium is determinded by adding the intrinsic value and the ________
value of the option. - ✔✔time
✔✔In accounting for a foreign currency borrowing, both the note payable and any
accrued interest payable on the note are - ✔✔Exposed to foreign exchange risk.
Revalued for changes in the foreign exchange rate.
, ✔✔A transaction exposure to foreign exchange risk exists when an exporter - ✔✔Allows
a foreign customer to pay in a foreign currency and allows the customer time to pay for
its purchases.
✔✔The types of derivatives most commonly used to hedge foreign exchange risk are -
✔✔Foreign currency option.
Foreign currency forward contracts.
✔✔When a derivative financial instrument is used to hedge a foreign currency firm
commitment, the firm commitment - ✔✔Is recognized as an asset or liability at its fair
value.
✔✔The premium paid to acquire a foreign currency option is determinded by adding
together the option's ______ value and its time value - ✔✔intrinsic
✔✔A company accrues interest payable on a foreign currency borrowing at the end of
the year. When the foreign currency-denominated interest is paid, the difference in the
amount of accrued interest and the amount actually paid resulting from a change in the
exchange rate should be recognized as - ✔✔A foreign exchange gain or loss
✔✔As time passes, the time value of a foreign currency option - ✔✔decreses
✔✔An unrealized foreign exchange loss on a foreign currency account receivable that
results from a depreciation in the foreign currency from the date of sale to the balance
sheet date is - ✔✔recognized in net income
✔✔The number of foreign currency units that can be purchased with one U.S. dollar is
_______ quote for that foreign currency. - ✔✔indirect
✔✔The fair value of a foreign currency forward contract is determined by reference to -
✔✔changes in the forward rate over the life of the forward contract.
✔✔The time value of a foreign currency option ______ as time passes - ✔✔decreases
✔✔The accounting for foreign currency hedges can differ between IFRS and U.S.
GAAP with regard to - ✔✔The recognition of changes in the fair value of forward
contracts used as fair value hedges.
The types of financial instruments allowed to be designated as cash flow hedges.
The timing of recognition of an option's time value as expense in net income.
✔✔When the forward rate for a foreign currency is lower than its spot rate on a given
date the foreign currency is selling at - ✔✔a discount in the forward market
