I probably meant something different to what I wrote. 
I meant, that, if she comes out of school upset and grumpy, and as she leaves, another mum asks me whether she had a bad day because she found PE difficult, DD will later report to her dad that she had a bad day because PE was difficult. She will tell someone in the shop on the way home that PE was very difficult for her today. She will talk quietly to herself about how she hopes it isn't PE again tomorrow because it was so hard. Then I remember she didn't have PE!
It is that she accepts another person's explanation or narrative (particularly when she's more emotional, or other people are more emotional) and uses it when talking to everyone else as if it's actually what she thinks.
It is not to lie to try to manipulate, or benefit herself. Actually, apart from this issue, she's very keen on the truth.
It can cause problems because if someone asks her a leading question she will answer in the way they are insinuating towards. But then apparently she truly believes it is true.
You can't say things like "How did you your sister hurt herself? Why is she crying? Did she fall?" because it will become a fall forever in her story, even if the actual answer is that she was hit by the bully next door. Or, worse, if someone asks that question the other way round "This is very important. I'm so angry. Did he hit her again?"
Both those last examples have happened where I witnessed the event and someone else asked her. She answers with whatever answer the question seems to lead her to.