The IASB’s Framework for the Preparation and Presentation of Financial Statements requires financial statements to be prepared on the basis that they comply with certain accounting concepts, underlying assumptions and (qualitative) characteristics. Five of these are:
II. Substance over form
RequiredBriefly explain the meaning of each of the above concepts/assumptions.
For most entities, applying the appropriate concepts/assumptions in for inventories is an important element in preparing their financial statements.RequiredIllustrate with an example how each of the concepts/assumptions in (a) may be applied to accounting for inventory