• Changes in reporting methods are accounted for prospectively if they
are changed because of a change in circumstance.
• Changes from FVTPL to Equity Method: The carrying
amount of the FVTPL investment, which would be the fair value
of the investment, becomes its new cost.
• Changes from Equity Method to FVTPL: On this date, the
investor shall measure at fair value any investment the investor
retains in the former associate. The investor shall recognize in
net income any difference between:
• (a) the fair value of any retained investment and any
proceeds from disposing of the part interest in the
associate, and
(b) the carrying amount of the investment
New locations.
Significant changes in the IT environment.
Operations in areas with unstable economies.
High degree of complex regulation.
4-1 A company that operates in the coal mining industry faces numerous business
risks. The following are selected business risks disclosed by Arch Coal, Inc. –
a coal producer in the United States.
General Risks:
Coal prices are subject to change and a substantial or extended decline in
prices could materially and adversely affect our profitability and the value
of our coal reserves.
Our coal mining operations are subject to operating risks that are beyond
our control, which could result in materially increased operating expenses
and decreased production levels and could materially and adversely affect
our profitability.
Competition within the coal industry could put downward pressure on coal
prices and, as a result, materially and adversely affect our revenues and
profitability.
Decreases in demand for electricity resulting from economic, weather
changes, or other conditions could adversely affect coal prices and
materially and adversely affect our results of operations.
a) delegates responsibility for risk management to all levels of the organization's
hierarchy.
2. The factors a risk management framework should address include all of the following except:
a) communications
b) policies and processes
c) names of responsible individuals.
3. Which of the following is the correct sequence of events for risk governance and
management that focuses on the entire enterprise? Establishing
a) risk tolerance, then risk budgeting, and then risk exposures.
b) risk exposures, then risk tolerance, and then risk budgeting.
c) risk budgeting, then risk exposures, and then risk tolerance.
4. Risk budgeting includes all of the following except:
a) determining the target return
b) quantifying tolerable risk by specific metrics
c) allocating a portfolio by some risk characteristics of the investments
5. Which of the following risks is best described as a financial risk?
a) Credit
b) Solvency
c) Operational
6. Liquidity risk is most associated with:
a) the probability of default.
b) a widening bid−ask spread.
c) a poorly functioning market.
7. An example of a non-financial risk is:
a) market risk
b) liquidity risk
c) settlement risk
8. An organization choosing to accept a risk exposure may
a) buy insurance
b) enter into a derivative contract
1. Liquidity risk is most associated with:
a) the probability of default.
b) a widening bid−ask spread.
c) a poorly functioning market.
2. An example of a non-financial risk is:
a) market risk
b) liquidity risk
c) settlement risk
3. An organization choosing to accept a risk exposure may
a) buy insurance
b) enter into a derivative contract
c) establish a reserve fund to cover losses
9. Liquidity risk is most associated with:
a) the probability of default.
b) a widening bid−ask spread.
c) a poorly functioning market.
10. An example of a non-financial risk is:
a) market risk
b) liquidity risk
c) settlement risk
11. An organization choosing to accept a risk exposure may
a) buy insurance
b) enter into a derivative contract
c) establish a reserve fund to cover losses
d) establish a reserve fund to cover losses