Which of the Following Statements Is Correct with Respect to Establishing

question 53

Multiple Choice

Which of the following statements is correct with respect to establishing reporting requirements for governments entering into derivative instruments?

• A) Changes in the value of hedge derivatives are deferred and reported in the Statement of Net Position.
• B) If a derivative is an investment derivative, the changes in the value of the derivative are deferred and reported in the Statement of Net Position.
• C) GASB standards regarding derivatives do not apply to proprietary funds.
• D) GASB standards regarding derivatives apply only to government financial statements prepared using the modified accrual basis of accounting.

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Definitions:

Forecasting Risk

The potential for actual outcomes to vary significantly from the predictions or expectations due to changes in variables or conditions.

Replacement

The act of substituting a new asset or item for an old or damaged one.

Internal Rate

Often referring to the internal rate of return (IRR), which is the rate of growth a project is expected to generate, calculated as the rate of discount that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

Net Present Value

A financial indicator that determines the variance between the current value of incoming and outgoing cash flows during a specific timeframe.