Which statement is correct about accounting for financial instruments?
A)All financial instruments are accounted for at fair value through profit or loss.
B)All are accounted for in accordance to their economic substance.
C)All financial instruments are accounted for at amortized cost.
D)All financial instruments are accounted for at fair value through OCI.

Question

Quizplus · Accepted Answer

Financial instruments are accounted for according to their economic substance rather than their legal form. This principle ensures that the financial statements reflect the underlying transactions' true nature and economic realities. Options A, C, and D are incorrect because not all financial instruments are accounted for in the same way; the accounting treatment depends on the classification of the financial instrument, which can vary.

Which Statement Is Correct About Accounting for Financial Instruments