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Describe in general terms the features of a transaction

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Under the IASB's conceptual Framework for Financial Reporting certain qualitative characteristics of useful financial information are identified. these are subdivided into characteristics considered fundermental and those considered to be enhancing. The two fundermental 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 transaction and its economic substance, the financial statements should reflect the economic substance.

Problem (a) Why is it considered important that the economic substance of a transaction be reflected in the financial statements over its legal form? Describe in general terms the features of a transaction that suggest that its economics substance may differ from its legal form

Reference no: EM132970691

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