Substance over form is hard to understand for people when English is a first language so don't worry too much. The best example to use is with an asset purchased on finance. Let's say a restaurant buys an oven on finance. The legal owner is the finance company as they have made the payments therefore the legal form is that the asset belongs to them and shouldn't appear on the balance sheet of the restauranter as it is not his property. However the substance of the transaction is that the restauranter is going to pay for it eventually so it really is his. If he waits until it is paid for before depreciating it, there will be a worthless asset to depreciation. The form is that the legal owner is the finance company but the substance means that it is included in the restaurants accounts.

Does that help? If not I'll try and find another way to explain it.

Can anyone explain to me the term : Substance over form in a simple term.

I couldn't find in the paper 1.1, and see question in revision kit re: page 43, question 2&3. On internet, the information I am getting is quite hard to understand. English is my second language, I need a simple definition for this term please.

Many thanks

Jane