Financial Terms Glossary

Substance Over Form


An accounting term (convention) that describes where 'the commercial substance of a transaction must override its contractual form'. Accountants are responsible for the true and fair reporting of results, and occasionally some contracts are written to deliberately confuse. This is the accountants' defence to allow them to report the situation properly.


A contract may have lots of legal jargon...and lawyers could argue forever what it means. Accountants have to report with 'truth and fairness' so they follow a convention in accounts reporting that the 'commercial reality of a contract should always take preference over the specific legal form'. So there !.

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