MC Question 19

Financial statements represent transactions in words and numbers.

To be useful, financial information must represent faithfully these transactions in terms of how they are reported.

Which of the following accounting treatments would be an example of faithful representation?


Charging the rental payments for an item of plant to the statement of profit or loss where the rental agreement meets the criteria for a finance lease


Including a convertible loan note in equity on the basis that the holders are likely to choose the equity option on conversion


Derecognising factored trade receivables sold without recourse


Treating redeemable preference shares as part of equity in the statement of financial position

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