FRS 5 Case Study Example | Topics and Well Written Essays - 1500 words

FRS 5 - Case Study Example The principle of FRS says that legal characterisation of the transaction should not be affected. The principle of the FRS 5 can be discussed through two factors. 1) Features of more complex Transactions. The link between the transactions should be created as that the commercial effect can be made out, considering the entire series. It should be ensured that with the separation of legal title, exposure of the risk inherent in the benefits can also be possible. Inclusion of the option is also necessary. There are certain transactions, those are accompanied by an option instead of commitment to the original owner or to the owner to repurchase or to the buyer to resell.2) Assessing commercial effect by considering the position of other parties. While assessing the commercial effect, it is important to consider the position of the related parties to it along with the motives of agreeing to its apparent expectation. It is important to have commercial logic to all of the related parties irr espective of whatever the substance of transaction is. Regarding the recognition of an item in the balance sheet, there are two conditions that it has to fulfil after meeting the definition of assets or liabilities. Those conditions are as follows: If there is an appropriate evidence of the benefit of future inflow or outflow along with the sufficient evidence of the existence of the item.The item should be measured by the monetary aspects.. Basically, FRS 5 has two key paragraphs which indicate the disclosure required for the complex transactions.