ACCA FR Syllabus A. The Conceptual And Regulatory Framework - Faithful Representation - Past Papers ^{3 / 8}

September 2016 ^Specimen

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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?

A	Charging the rental payments for an item of plant to profit or loss where the rental agreement meets the criteria for a right of use asset
B	Including a convertible loan note in equity on the basis that the holders are likely to choose the equity option on conversion
C	Treating redeemable preference shares as part of equity in the statement of financial position
D	Derecognising factored trade receivables sold without recourse to the seller

June 2015

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Faithful representation is a fundamental characteristic of useful information within the IASB’s Conceptual framework
for financial reporting.

Which of the following accounting treatments correctly applies the principle of faithful representation?

A	Reporting a transaction based on its legal status rather than its economic substance
B	Excluding a subsidiary from consolidation because its activities are not compatible with those of the rest of the group
C	Recording the whole of the net proceeds from the issue of a loan note which is potentially convertible to equity shares as debt (liability)
D	Allocating part of the sales proceeds of a motor vehicle to interest received even though it was sold with 0% (interest free) finance