The Study On The Application Of Substance Over Form Principle

The complexity and diversity of economic activities often makes the laws and regulations fail in presenting all the real substance. In order to integrate accounting information and economic activities, the firm shouldn't confirm, measure and report only on the forms but the economic substance of trades and activities, which means substance is more important than form in accounting.It is very important for China's accounting regulations and laws to study the accounting application of substance overweight form. Why substance is more important than form? The following are the reasons: Firstly, beginning with the explanation of the real substance and external form, we analyze the relationship between economic substance and regulations form to research the way how we apply substance over form principle in accounting as the tools and measures reflecting economic activities. Secondly, beginning with the application of this principle in accounting criteria, by comparing the different historic source of the application in and out china, we study the course and viewpoints in application of substance over form principal. Thirdly, we stress on the problems and their causes when applying the principle in China's accounting criteria, then we come the conclusion that substance overweight form will be applied wildly in modifying and improving accounting criteria and get the corresponding countermeasures by analyzing the problems and reasons when applying. Finally, the study on the principle gives some reference in directing China's accounting practice, internationalizing and improving accounting criteria, preventing audit risks.Here comes the conclusion that it's the most important and the Guarantee to carry out the principle to upgrade accounting professional and strengthen accounting morality.