Give investors what they need

In order to be awarded CPD units you must answer the following five random questions correctly. If you fail the test, please re-read the article before attempting the questions again.

  1. Discussion of the management of financial capital is normally linked with entities that are subject to external capital requirements but it is equally important to those entities who do not have regulatory obligations. What is the accepted definition of financial capital?

  2. An understanding of what an entity views as capital and its strategy for capital management is important to all companies and not just banks and insurance companies. Users have diverse views of what is important in their analysis of capital. Which of the following information would not primarily be used in user analysis of financial capital?

  3. The capital of an entity does not relate solely to financial instruments as there are many elements to it. As a result of this fact where has the IASB included most of the disclosure requirements as regards capital?

  4. Investors have specific but different needs for information about capital depending upon their approach to the valuation of a business. Which of the following valuation approaches would not be affected by information about the financial capital of the business?

  5. There are various requirements for entities to disclose information about capital. The IASB believes that disclosures about capital are useful for all entities. What are the disclosures about capital not intended to replace?

  6. In addition to the annual report, an investor may find additional details of the capital structure where the entity is involved in a transaction, such as a sale of bonds or equities. What information regarding financial capital is normally produced when an entity is involved in an equity issue?

  7. Essentially there are two classes of capital reported in financial statements, namely debt and equity. However, debt and equity instruments can have different levels of right, benefit and risks. Which of the following effects on the financial statements of an entity is not the result of the classification of debt and equity instruments?

  8. Besides the requirements of IAS 1,the IFRS Practice Statement, Management Commentary suggests that certain disclosures would be useful for investors. Which of the following disclosures is recommended by the Practice Statement?

  9. Some of the disclosures made by entities include information as to how gearing is managed, how capital is managed to sustain future product development and how ratios are used to evaluate the appropriateness of its capital structure. What may an entity disclose where aggregation of capital would not provide useful information?

  10. IFRSs require an entity to disclose information that enables users to evaluate objectives, policies and processes for managing capital. This objective is obtained by disclosing qualitative and quantitative data. What did the IASB decided should be disclosed instead of the quantitative disclosure of externally imposed capital requirements?