What is the substance above the form?

Over Form is the standard of financial statement from basic accounting principles. The purpose of the statement forces accountant to represent transactions based on economic substances rather than on legal form. This accounting principle consists of three requirements: completeness, relevance and accuracy. Each transaction must meet these requirements essentially beyond the principle of form. Financial statements prepared by this principle often represent information in the most true way. Companies must record every transaction in its full form. If the transactions have multiple parts that appear over time, the accountant must only record the part that affects the current accounting period. Publication is often necessary to inform stakeholders about long transactions. Any plans or other calculations needed to record transactions can also be carried out by depressors.

Relevance means that financial transactions have an impact on the company. For example, the costs paid a few years ago for assets should not be taken into accountleaving for replacement. The price paid originally will probably not reappear. The accountant should therefore not include this information in any news for a new purchase. Another example of relevance above the form is where the costs differ according to various alternatives; Only the alternative is considered.

accuracy basically dictates that all recorded transactions are without errors. The calculations should be clear and concise, which shows the effect of financial information. In many cases, an accounting manager or supervisor may be required to sign out in accounts and statements. This signature suggests that the other person has reviewed documents, calculations and transactions for accuracy. Reconk accuracy testing may also be necessary Ciliation.

In some cases, accountants may sacrifice accuracy when completing the financial statements. Completeness and relevance are more meaningful under the substance.Although the accountants should always strive for accuracy, digestion too many hours of work on one project can lead to a delayed financial statement. Other activities may also suffer when the accounting lags behind due to time -related problems. For example, tax reports or public limits may not be met by a company.

While companies must report all information legally, this is not necessarily the most important aspect of financial information. The company usually has a legal department that reviews this information. Accountants prefer the lower line, which is whether the company has made a profit. The attempt to satisfy the legal and financial aspects below the form is too cumbersome for the accounting.