In some cases, the grantor may provide other items to the service concession operator.

If such
assets form part of the consideration payable by the grantor for the services, these assets are
recognized as:
a. Government assistance
b. Government grants
c. Government loan
d. Assets of the operator measured at fair value on Initial recognition

A swap that involves the exchange of a set of payments in one currency for a set of payments in
another currency is a(n)
a) Interest rate swap.
b) Currency swap.
c) Swaptions.
d) National swap.

On January 1, 2021, S Company borrowed P5,000,000 from a bank at a variable rate of interest
for 4 years. Interest will be paid annually to the bank on December 31, 2024. Under the
agreement, the market rate of interest every January 1 resets the variable rate for that period
and the amount of interest is to be paid on December 31. In conjunction with the loan, S
Company entered into a “receive variable, pay fixed” interest rate swap agreement with another
bank speculator. The interest rate swap agreement was designated as a cash flow hedge. The
market rates of interest are: January 1, 2021 10% January 1, 2022 14% January 1, 2023 12%
January 1, 2024 11% The present value of an ordinary annuity of 1 is 2.32 at 14% for three
periods, 1.69 at 12% for two periods and 0.90 at 11% for one period. What is the derivative
asset or liability on December 31, 2023?
a) P45,000 asset
b) P45,000 liability
c) P50,000 asset
d) P50,000 liability

What is not applicable for interest rate swaps?

a) You may either pay or receive the fixed rate.
b) Interest may be determined in advance or in arrears.
c) You may either pay or receive the floating rate.
d) The principal changes hands at the beginning of the swap.

A swap is a contract where parties

a) Agree to the future price of a currency exchange.
b) exchange flows of payments.
c) exchange future cash flows for past cash flows.
d) have the right to buy an underlying asset at a fixed price.
On January 1, 2021, R Company received a four-year P5,000,000 loan with interest payment
occurring at the end of each year and the principal to be repaid on December 31, 2024. The
interest for 2021 is the prevailing market rate of 10% on January 1, 2021, and the market
interest rate every January 1 resets the variable rate of interest for that year. The “underlying”
fixed interest rate is 10%.
In conjunction with the loan, the entity entered into a “receive variable pay fixed” interest rate
swap agreement as cash flow hedge. The interest swap payment will be made on December 31
of each year. The market rate of interest is 6% on January 1, 2022 and 7% on January 1, 2023.
Round off present value factor to two decimal places.

What is the derivative asset or liability on December 31, 2021?

a) P504,000 asset
b) P504,000 liability
c) P534,000 asset
d) P534,000 liability

Under a financial asset model of Service Concession Arrangement, the operator has as
unconditional night to receive cash if the grantor contractually guarantees to pay the operator:
a. Specified or determinable amounts.
b. The shortfall between amounts received from users of the public service and specified or
determinable amounts.
c. Either specific/determinable amounts or the shortfall between amounts received from
users of public service and specified/determinable amounts.
d. Neither specific/determinable amounts nor the shortfall between amounts received from
users of public service and specified/determinable amounts.

According to PFRIC 12. Service Concession Arrangement, the infrastructure asset shall be
recognized by the operator as:
a. Property, plant and equipment
b. Financial asset
c. Intangible asset
d. Either financial asset or intangible asset

In accordance with PAS 23, borrowing costs attribute during the construction phase of the
arrangement shall be capitalized as a component of:
a. Intangible asset
On January 1, 2021, R Company received a four-year P5,000,000 loan with interest payment
occurring at the end of each year and the principal to be repaid on December 31, 2024. The
interest for 2021 is the prevailing market rate of 10% on January 1, 2021, and the market
interest rate every January 1 resets the variable rate of interest for that year. The “underlying”
fixed interest rate is 10%.

In conjunction with the loan, the entity entered into a “receive variable pay fixed” interest rate
swap agreement as cash flow hedge. The interest swap payment will be made on December 31
of each year. The market rate of interest is 6% on January 1, 2022 and 7% on January 1, 2023.
Round off present value factor to two decimal places.

What is the derivative asset or liability on December 31, 2022?

Group of answer choices

a) P271,500 asset
b) P271,500 liability
c) P261,000 asset
d) P261,000 liability