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Dharmendra jatiya

Dharmendra jatiya (Querist)

17 October 2013 what is "substance over form"

CA Chandra Kishore Bajpai

CA Chandra Kishore Bajpai (Expert)

17 October 2013 Substance over Form is concept where real facts is recognized instead of following legal Form or prescribed Form while preparing financial statement of the organisation so that true & fair view of the affair can be presented.
For example:- under lease agreement of a property, lessor would be legal owner but for accounting purpose lessee would be the owner and he would claim depreciation etc

@VaibhavJ

@VaibhavJ (Expert)

17 October 2013 Hi

Substance over form is an accounting principle used "to ensure that financial statements give a complete, relevant, and accurate picture of transactions and events". If an entity practices the 'substance over form' concept, then the financial statements will show the overall financial reality of the entity (economic substance), rather than the legal form of transactions (form).[1] In accounting for business transactions and other events, the measurement and reporting is for the economic impact of an event, instead of its legal form. Substance over form is critical for reliable financial reporting. It is particularly relevant in cases of revenue recognition, sale and purchase agreements, etc.

Thanks

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