4.
Design & Product Development
User-Centered Design: Products should prioritize functionality and user experience
rather than just aesthetic appeal.
o Example: A smartphone with an elegant design but poor usability (e.g., bad
battery life, unintuitive UI) would violate the principle.
Would you like a deeper focus on any specific field?
4o
You said:
substance over form concept examples
ChatGPT said:
Here are some practical examples of the substance over form concept across different fields:
1. Accounting & Finance
Example: Lease Accounting (IFRS 16 & ASC 842)
A company rents equipment under a long-term lease with terms that effectively
transfer ownership risks and benefits.
Even if legally called a "rental," it must be recorded as a finance lease (right-of-use
asset & liability) because, in substance, it's a purchase.
Example: Revenue Recognition
A company sells goods to a distributor but retains control over pricing and inventory
risks.
Even though it’s legally a sale, the company cannot recognize revenue immediately
because, in substance, it still controls the goods.
2. Taxation & Law
Example: Tax Avoidance via Offshore Companies
A business establishes a shell company in a tax-free jurisdiction and routes profits
through it to avoid higher domestic taxes.
Tax authorities may ignore the legal form and tax the business as if the profits were
earned in the home country.
Example: Employee vs. Independent Contractor
A company hires workers as "independent contractors" but requires them to follow
strict schedules, use company equipment, and work exclusively for them.
Despite the legal contract, labor laws may classify them as employees and grant them
benefits like social security and paid leave.
3. Business & Mergers
Example: Hidden Acquisition
Company A and Company B claim to be entering a "strategic partnership," but in
reality, Company A has full control over Company B's decisions and finances.
Regulators may treat this as an acquisition rather than a partnership and apply merger
control laws.
4. Banking & Financial Instruments
Example: Substance Over Form in Loan Agreements
A bank gives a company funds but structures the transaction as an "investment" rather
than a loan to avoid debt classification.
If the company is required to repay with interest, regulators may classify it as a loan
despite its legal form.
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