Meaning of substance over form in financial accounting?

Question

Meaning of substance over form in financial accounting?

Answer 1

I will answer it from different angle.

Some non-ethical accountant/ company might try to hide the actual financial transaction that has happened by creating multiple offsetting entries and use different accounts to trick the auditor/ stakeholders (remember how Enron capitalized expenses?). The truth (the substance) however remains the same & still can be found although the transactions are recorded elsewhere/ reported differently (form).

Answer 2

"Substance over form"  means the financial statements reflect the financial reality of the entity rather than the legal form of the underlying transactions of the entity.

Example:  If a horse is disguised to look like a donkey, it's still a horse. Substance a horse, but dressed up to look like a donkey (in form only).