The accountant of Lisbon is considering a number of transactions and events and how they should be treated in accordance with the concepts and qualitative characteristics of financial information as set out in the Conceptual Framework. During the year ended 31 March 20X6, Lisbon experienced the following transactions or events. (i) Sold an asset to a finance company and leased it back for the remainder of its useful life.The accountant has decided that this should be treated as a secured loan. (ii) The company's statement of profit or loss prepared using historical costs showed a loss from operating its shops, but the company is aware that the increase in the value of its properties during the period far outweighed the operating loss. (iii) Inventory has up to this year been valued using FIFO but the accountant is considering changing to the weighted average method for the year to 31 March 20X6.

REQUIRED

The accountant is aware that some members of the Board of Lisbon have little understanding of accounting and he is worried about his presentation of the financial statements at the Board meeting.How should he deal with this situation?(5 marks)

Which concept or qualitative characteristic has influenced the decision in (i) above?(5 marks)

In looking at issue (ii) above, the accountant decides that the properties should be revalued. Which concept or qualitative characteristic has been applied in making this decision? (5 marks)

In applying the principle of comparability, how should the change of inventory valuation basis be accounted for?(5 marks)