Question 1

a) The IASBs 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:

Matching/accruals

Substance over form

Prudence

Comparability

Materiality

Required

Briefly explain the meaning of each of the above concepts/assumptions (3 marks)

(b) For most entities, applying the appropriate concepts/assumptions in for inventories is an important element in preparing their financial statements