CIMAPRA19-F02-1 Exam - Topic 1 Question 3 Discussion

BC are currently seeking to establish an accounting policy for a particular type of transaction.

There are four alternative ways in which this transaction can be treated. Each treatment will have a different outcome on the financial statements as follows:

* Treatment one means that the financial statements will be easier to prepare.

* Treatment two will give a fair representation of the transaction in the financial statements.

* Treatment three will maximise the profit figure presented in the financial statements.

* Treatment four means that the financial statements will be more easily understood by shareholders.

Which accounting treatment should BC adopt?