TRUE OR FALSE

1. In assessing whether potential voting rights contribute to significant influence, the entity examines all facts and circumstances that affect potential rights, except the intentions of management and the financial ability to exercise or convert those potential rights.
2. When an entity has an investment in an associate, a portion of which is held indirectly through a venture capital organisation, or a mutual fund the entity may elect to measure that portion of the investment in the associate at fair value through profit or loss regardless of whether the venture capital organisation, or the mutual fund has significant influence over that portion of the investment.
3. If an entity's ownership interest in an associate is reduced, but the investment continues to be classified as an associate, the entity shall reclassify to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest even if that gain or loss would not be required to be reclassified to profit or loss on the disposal of the related assets or liabilities.
4. Gains and losses resulting from 'upstream' and 'downstream' transactions involving assets between an entity and its associate are recognised in the entity's financial statements only to the extent of related investors' interests in the associate or joint venture.
5. The entity can appropriately use the financial statements of the associate in applying the equity method if the difference between the entity and associate's end of reporting period is not exceeding two months.