ACCA FA · Chapter 2 · Question 6 of 10
Which of the following best describes the principle of substance over form?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Transactions are accounted for in accordance with their economic reality rather than merely their legal form
Explanation
Faithful representation requires that the economic substance of a transaction is reported, even when it differs from its legal form. For example, an entity may control and benefit from an asset before legal title passes to it. Recording only on transfer of legal title or on receipt of cash would not reflect the economic reality.
More The qualitative characteristics of financial information MCQs
- Q8How does the IASB Conceptual Framework define a liability?
- Q9Which of the following would meet the Conceptual Framework definition of an asset of a trading company?
- Q10Which of the following is NOT income as defined in the Conceptual Framework?
- Q1Which TWO qualitative characteristics are identified as fundamental in the IASB Conceptual Framework?
- Q2Which of the following is an ENHANCING qualitative characteristic of useful financial information?