... it discusses some debates over the 'SOF' methodology, and argues it would not be enforced as a standard but used to develop individual and specific standards to deal with particular areas. Finally, it concludes this essay. Part 1 The Substance of the Transaction 'Substance' can be viewed as the 'reality' or commercial substance of a transaction or an event, whereas 'Form' can be viewed as the strict 'legal' interpretation of a transaction of event.1 Hence, SOF essentially means that it is more important to report in financial statements the economic substance or reality, rather than the legal form.2 i.e. if there is conflict between the substance of a transaction and the legal form of a transaction, the economic substance should take precedence over legal form.3 The substance of transactions should be recorded in financial statements.4 According to the references of FRS 5, a key factor in determining the substance of a transaction ...

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