The classification of a financial instrument on the statement of financial position of an entity is governed by the principle of:
A) legal form.
B) forfeiture.
C) net present value.
D) substance over form.

Question

Quizplus · Accepted Answer

The principle of substance over form requires that the economic substance of a transaction or financial instrument should be recognized over its legal form. This means that the classification of a financial instrument should reflect the underlying economic reality of the transaction, rather than just its legal form. Therefore, the correct classification should reflect the economic substance of the transaction.

The Classification of a Financial Instrument on the Statement of Financial