Day 2

Question 1

Level 1 of Fair Value Hierarchy

Answer 1

A quoted price in an active market for an identical asset or liability

Question 2

Level 2 of Fair Value Hierarchy

Answer 2

Replicate market price using observable inputs
* no unobservable inputs

Question 3

Level 3 of Fair Value Hierarchy

Answer 3

Replicate market price using observable inputs and unobservable inputs

Question 4

Errors

Answer 4

A priori errors are re-stated with the correct number (ie no fabricated numbers issued to balance the books)

Question 5

Financial Instrument

Answer 5

Contract creating financial assets for one entity and a financial liability or equity instrument for another entity

Question 6

Financial Asset

Answer 6

• Cash, equity of another entity
• Contractual right to exchange financial assets or liabilities favourably

Question 7

Financial Liability

Answer 7

• Contractual obligation to deliver a financial asset
• Contractual obligation to exchange a financial asset or liability unfavourably