Question : 91. Which of the following a characteristic of a derivative? A. has one : 1245717

91. Which of the following is a characteristic of a derivative? 
A. has one or more underlyings
B. has one or more notional amounts
C. exchanging of promises with a counterparty
D. require or permit a net settlement
E. all of the above

92. The U.S. GAAP and IASB require that firms record derivatives on the balance sheet date at 
A. historical cost.
B. fair value.
C. amortized acquisition cost.
D. future value of present cash flows.
E. present value of future cash flows.

93. Gains and losses on effective cash flow hedges are reported initially in 
A. accumulated other comprehensive income.
B. contributed capital.
C. net income.
D. an adjustment to the beginning balance of retained earnings.
E. an adjustment to the ending balance of retained earnings.

94. Gains and losses on speculative securities, fair value hedges, and the ineffective portion of cash flow hedges are included in 
A. accumulated other comprehensive income each period.
B. contributed capital each period.
C. net income each period.
D. an adjustment to the beginning balance of retained earnings.
E. an adjustment to the ending balance of retained earnings.

95. Cash flow hedges are revalued to market value each period and gains and losses from changes in the market values of such derivatives appears 
A. in accumulated other comprehensive income each period to the extent the financial instrument is “highly effective” in neutralizing the risk and the remainder in (current) net income.
B. in the Contributed capital section each period to the extent the financial instrument is “highly effective” in neutralizing the risk and the remainder in net income currently.
C. in net income each period regardless of effectiveness.
D. in retained earnings each period regardless of effectiveness.
E. in reserves for contingencies each period regardless of effectiveness.

96. A fair value hedge 
A. is a derivative instrument acquired to hedge exposure to changes in the fair value of an asset or liability.
B. must be revalued each period and the resulting gain or loss is reflected in contributed capital each period.
C. is not revalued each period with no recognition given of the resulting gain or loss in earnings.
D. must be accounted for under the lower of cost or market principles.
E. must be revalued each period and the resulting gain or loss is reflected in reserves for contingencies each period.

97. U.S. GAAP and IFRS require firms to classify derivatives as  
A. fair value hedges, only.
B. cash flow hedges, only.
C. not a hedging instrument, only.
D. fair value hedges or cash flow hedges, only.
E. fair value hedges, cash flow hedges, or not a hedging instrument.

98. Which of the following is/aretrue? 
A. Derivatives designated as cash flow hedges or fair value hedges receive special accounting treatment.
B. The choice between the derivatives designation of cash flow hedges or fair value hedges depends on the firm’s general hedging strategy and its purpose in acquiring the particular derivative instrument.
C. According to U.S. GAAP, if a firm does not designate a particular derivative as either a fair value hedge or a cash flow hedge, the firm must account for the derivative as if it were a trading security
D. According to IFRS, if a firm does not designate a particular derivative as either a fair value hedge or a cash flow hedge, the firm must account for the derivative as a security at fair value through profit and loss.
E. all of the above

99. Derivative instruments acquired to hedge exposure to changes in the
fair values of assets or liabilities are fair value hedges. Fair value hedges are 
A. hedges of a recognized asset or liability (or an identified portion of a recognized asset or liability), only.
B. hedges of an unrecognized firm commitment (or an identified portion of that commitment), only.
C. hedges on some or all of the cash flows of a recognized asset or liability, only.
D. hedges on some or all of the cash flows of forecasted transactions, only.
E. hedges of a recognized asset or liability (or an identified portion of a recognized asset or liability), and hedges of an unrecognized firm commitment (or an identified portion of that commitment).

100. Cash flow hedges are 
A. hedges of a recognized asset or liability (or an identified portion of a recognized asset or liability), only.
B. hedges of an unrecognized firm commitment (or an identified portion of that commitment), only.
C. hedges on some or all of the cash flows of a recognized asset or liability, only.
D. hedges on some or all of the cash flows of forecasted transactions, only.
E. hedges on some or all of the cash flows of a recognized asset or liability, and hedges on some or all of the cash flows of forecasted transactions.