Economic Substance – NBC Institute

FR – May 2018 – L2 – Q2a – Conceptual Framework for Financial Reporting

Discuss the importance of recording transactions based on their substance over form and explain features that show substance may differ from legal form.

Question

Discuss the importance of the statement that transactions should be recorded in the financial statements based on their substance over form. Explain the features that may show that the substance of a transaction may differ from its legal form.

Answer

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Tags: Conceptual Framework, Economic Substance, Financial Reporting, Legal form, Substance Over Form, True and Fair View
Level: Level 2

Topic: Conceptual Framework for Financial Reporting
Series: MAY 2018

FR – Nov 2018 – L2 – Q5b – Professional and Ethical Issues in Financial Reporting

Explanation of the importance of 'Substance Over Form' and features indicating that the economic substance of a transaction may differ from its legal form.

Question

Under the IASB’s Conceptual Framework for Financial Reporting, certain qualitative characteristics of useful financial information are identified. These are subdivided into characteristics considered fundamental and those considered to be enhancing. The two fundamental characteristics identified by the framework are ‘relevance’ and ‘faithful representation’. In order for financial transactions to be represented faithfully in the financial statements, the principle of ‘substance over form’ should be applied. This means that wherever there is a difference between the legal form of a transaction and its economic substance, the financial statements should reflect the economic substance.

Required:
i. Discuss the importance of the concept of ‘substance over form’.
(4 marks)

ii. Describe FOUR (4) features of a transaction that suggest that its economic substance may differ from its legal form.
(6 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting Standards, Economic Substance, Professional Ethics, Substance Over Form
Level: Level 2

Topic: Professional and Ethical Issues in Financial Reporting
Series: NOV 2018

FR – May 2018 – L2 – Q2a – Conceptual Framework for Financial Reporting

Discuss the importance of recording transactions based on their substance over form and explain features that show substance may differ from legal form.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Conceptual Framework, Economic Substance, Financial Reporting, Legal form, Substance Over Form, True and Fair View
Level: Level 2

Topic: Conceptual Framework for Financial Reporting
Series: MAY 2018

FR – Nov 2018 – L2 – Q5b – Professional and Ethical Issues in Financial Reporting

Explanation of the importance of 'Substance Over Form' and features indicating that the economic substance of a transaction may differ from its legal form.

Question

Required:
i. Discuss the importance of the concept of ‘substance over form’.
(4 marks)

ii. Describe FOUR (4) features of a transaction that suggest that its economic substance may differ from its legal form.
(6 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting Standards, Economic Substance, Professional Ethics, Substance Over Form
Level: Level 2

Topic: Professional and Ethical Issues in Financial Reporting
Series: NOV 2018

Question Tag: Economic Substance

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FR – May 2018 – L2 – Q2a – Conceptual Framework for Financial Reporting

Discuss the importance of recording transactions based on their substance over form and explain features that show substance may differ from legal form.

FR – Nov 2018 – L2 – Q5b – Professional and Ethical Issues in Financial Reporting

Explanation of the importance of 'Substance Over Form' and features indicating that the economic substance of a transaction may differ from its legal form.

FR – May 2018 – L2 – Q2a – Conceptual Framework for Financial Reporting

Discuss the importance of recording transactions based on their substance over form and explain features that show substance may differ from legal form.

FR – Nov 2018 – L2 – Q5b – Professional and Ethical Issues in Financial Reporting

Explanation of the importance of 'Substance Over Form' and features indicating that the economic substance of a transaction may differ from its legal form.

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Question Tag: Economic Substance

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FR – May 2018 – L2 – Q2a – Conceptual Framework for Financial Reporting

Discuss the importance of recording transactions based on their substance over form and explain features that show substance may differ from legal form.

You're reporting an error for "FR – May 2018 – L2 – Q2a – Conceptual Framework for Financial Reporting"

FR – Nov 2018 – L2 – Q5b – Professional and Ethical Issues in Financial Reporting

Explanation of the importance of 'Substance Over Form' and features indicating that the economic substance of a transaction may differ from its legal form.

You're reporting an error for "FR – Nov 2018 – L2 – Q5b – Professional and Ethical Issues in Financial Reporting"

FR – May 2018 – L2 – Q2a – Conceptual Framework for Financial Reporting

Discuss the importance of recording transactions based on their substance over form and explain features that show substance may differ from legal form.

You're reporting an error for "FR – May 2018 – L2 – Q2a – Conceptual Framework for Financial Reporting"

FR – Nov 2018 – L2 – Q5b – Professional and Ethical Issues in Financial Reporting

Explanation of the importance of 'Substance Over Form' and features indicating that the economic substance of a transaction may differ from its legal form.

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