- 6 Marks
CR – May 2018 – L3 – SB – Q4a – Presentation of Financial Statements (IAS 1)
Explain how off-statement financing can mislead financial statement users, with examples for three user groups.
Question
a. Recording the substance of transactions, rather than their legal form, is an important principle in financial reporting. The use of off-statement of financial position financing arrangement enables companies to obtain financing without showing debts in their books.
Required:
Describe how the use of off-statement of financial position financing can mislead users of financial statements, making specific reference to THREE user groups and giving examples where recording the legal form of transactions may mislead them. (6 Marks)
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