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What does substance over form means ???

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6 Replies

Sunshine (Helping All) (10575 Points)
Replied 18 April 2011

means transactions are recorded not by looking at its legal aspect only...the practical portion is also to be seen..the real economic aspect is seen and then the transactions are recorded..like in case of Hire purcahse transactions...The purchaser is not the owner of the asset legally but due to the substance i'e practicability..we still show the hire purchase asset in the books of the purchaser even though he is not the real owner...the economic viability is given preference over legal form...

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Manoj jain (Intern) (535 Points)
Replied 18 April 2011

When an entity practice the Substance Over Form, it means that the financial statements reflect the financial reality of the entity (Substance) rather than the legal form of the transactions and events(Form) which underlie them.To put it very simply: if it is a goat but it was disguised in a legal form to look like a dog, Substance Over Form would prevail to reinstate that it is a goat and not a dog!

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mridul savio Pinto (articled trainee ) (1477 Points)
Replied 18 April 2011

Originally posted by : Manoj jain
	When an entity practice the Substance Over Form, it means that the financial statements reflect the financial reality of the entity (Substance) rather than the legal form of the transactions and events(Form) which underlie them.To put it very simply: if it is a goat but it was disguised in a legal form to look like a dog, Substance Over Form would prevail to reinstate that it is a goat and not a dog! AGREE !11