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) net present value;
C) substance over form;
D) forfeiture.

Question

Quizplus · Accepted Answer

The principle of substance over form means that the economic reality of a financial instrument should be considered rather than just its legal form or appearance. This principle focuses on the underlying economic substance of a transaction or event rather than its legal or accounting treatment. Therefore, it is the most appropriate principle for the classification of financial instruments on the Statement of Financial Position.

The Classification of a Financial Instrument on the Statement of Financial