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The classification of a financial instrument on the statement of financial position of an entity is...

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

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Answer #1

Answer:D. Substance over Form

The substance of a financial instrument, rather than its legal form, governs its
arrangement in the entity’s balance sheet. Substance and legal form are
normally regular, but not permanently. Some financial instruments take the legal
form of equity nonetheless are liabilities in substance and others may syndicate structures
related with equity instruments and features related with financial
liabilities

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