(b) For most entities , applying the appropriate concepts /assumptions in for inventories is an important element in preparing their financial statements Required Illustrate with an example how each of the concepts /assumptions in (a) may be applied to accounting for inventory QUESTION 2 (a) An important aspect of the International Accounting Standards Board's (IASB ) Framework for the Preparation and Presentation of Financial Statements is that transactions should be recorded on the basis of their substance over their form Required Explain why it is important that financial statements should reflect the substance of the underlying transactions and describe the features that may indicate that the substance of a transaction may be different from its legal form (b). Wardle's activities include the production of maturing products which take a long time before they are ready to retail. Details of one such product are that on 1 April 2009 it had a cost of Tshs. 5 billion and a fair value of Ishs. 7 billion. The product would not be ready for retail sale until 31 March 2012 . On 1 April 2009 Wardle entered into an agreement to sell the product to Easy finance for Ishs . 6 billion . The agreement gave Wardle the right to repurchase the product at any time up to 31 March 2012 at a fixed price of Ishs 7,986,000,000 at which date Wardle expected the product to retail for Ishs . 10 billion . The compound interest Wardle would have to pay on a three -year loan of Ishs . 6 billion would be : Ishs Year 1 600,000 Year 2 660.000 Year 3 726,000 This interest is equivalent to the return required by Easy finance Required : Assuming the above figures prove to be accurate , prepare extracts from the income statement of Wardle for the three years to 31 March 2012 in respect of the above transaction (i) Reflecting the legal form of the transaction (ii) Reflecting t the substance of the transaction QUESTION 3 (a) Your assistant has been reading the LASB's Framework for the Preparation and Presentation of Financial Statements (the Framework ) and, as part of the qualitative characteristics of financial statements under the heading of 'relevance ', he notes that the predictive value of information is considered important . He is aware that financial statements