Substance over form
Substance over form means depicting the economic reality of an arrangement rather than merely its legal label. Faithful representation requires attention to the rights and obligations actually created. The accountant examines the agreement as a whole, including enforceable rights and obligations, before selecting the applicable treatment.
Worked example
An agreement labelled a sale may need different accounting if the seller retains the relevant economic risks and rights.
Common mistake
Assuming the name in a contract alone determines its accounting.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Direct | July 2027–August 2028 |
| FIA | FFA | Direct | September 2026–June 2027 |
Related terms
Also called: economic substance