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This paper aims to analyse the concept of form over substance and introduces the term substance gap to the literature. The substance gap is defined as the difference between the way a concept is expressed and its intended result. Besides, the study investigates the issue from both classical and contemporary viewpoints.

The methodology adopted in this paper is descriptive research.

This paper has depicted the substance gap in contemporary contracts and found that form is equally important as substance in Islamic finance contracts. This paper offers a fresh outlook on form and substance to highlight the importance of the issue and its significance. The findings of the study will help researchers address the issue at its roots and help them to bridge the gap between the form and substance of Islamic finance contracts.

This paper investigates the substance gap in contemporary contracts that exists between the fiqh rules and conditions of an Islamic contract, and their development and construction. Further, the gap could also be attributed to the pressure to cope with a complicated modern finance environment.

It has been said that standards issued by the International Accounting Standards Board (IASB) are more congruent with a principles-based approach to standards setting than those of the Financial Accounting Standards Board (FASB). Revelations concerning accounting manipulations at Enron Corp., and the ensuing scandal resulting from these revelations, have prompted the FASB to reassess its approach to accounting standards setting with the possible intent of moving FASB standards-setting processes closer to a principles-based approach. One area that IASB standards tend to emphasize more than FASB standards is the concept of substance over form. The bankruptcy of Enron Corp. provides a vivid illustration of how companies may use the legal form of transactions to obscure their economic substance. The purpose of this chapter is to examine the concept of substance over form by investigating Enron’s use of misleading accounting practices in the following areas: (1) off-balance sheet financing; (2) revenue recognition; and (3) financial statements disclosures. In these three areas of accounting concern, the chapter sets forth the relevant US Generally Accepted Accounting Principles (US GAAP) requirements, along with the ways in which Enron manipulated GAAP while concealing the economic substance underlying the transactions. It is the argument of this chapter that had the concept of substance over form been properly applied at Enron, investors and creditors would have been provided with a more realistic view of the company’s financial position and its results of operations, perhaps avoiding what became the one of the largest corporate bankruptcies in US history. The conclusion is that the FASB should focus on the concept of substance over form as it contemplates moving toward a principles-based approach to accounting standards setting.

This paper aims to determine whether tax evasion savings qualify as unlawful proceeds for money laundering purposes. Litigators, regulators and academics have debated the question for decades. A common argument is that tax evasion allows a bad actor to save money that the perpetrator already has on hand. It does not produce a new inflow of wealth that could properly be classified as proceeds. This paper addresses the validity of this argument by using a substance-based approach.

This paper applies the substance-over-form principle and two specialized judicial doctrines to the matter: the economic-substance and step-transaction doctrines.

This paper finds that in substance, tax evasion savings qualify as unlawful proceeds. The opposing argument may be valid on the surface, but it does not withstand the scrutiny of the substance-based principle and insights from the doctrines.

The finding of this paper implies that any courts which value substance can embrace tax evasion savings as unlawful proceeds. Government prosecutors can adopt the position with confidence that substance backs them up. National regulators can push the point. The United Nations’ Financial Action Task Force can consider the option to more explicitly recommend treating tax evasion savings as unlawful proceeds for money laundering.

Using a unique substance-based approach, this paper demonstrates that a dollar of tax evasion savings is substantively equivalent to a dollar of unlawful tax refund proceeds for money laundering purposes. Focusing on an unlawful tax refund overcomes many of the common concerns raised against the treatment of tax evasion savings as unlawful proceeds.

The purpose of this paper is to investigate the techniques used by Islamic financial institutions (IFIs) to shift conventional instruments to Shariah-compliant instruments. The paper additionally aims to explore the effect of these techniques on financial reporting.

The study recognized two techniques used by the IFI: the combination of contracts which compartmentalizes the economic transaction into a series of linked sub-transactions, and the inclusion of donation (Tabarru) in commercial contracts. The paper also reviews the accounting treatment according to the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), and compares it to the concepts adopted by the traditional financial reporting framework concepts (especially substance over form concept).

With regard to the combination of contracts technique, the major accounting challenge is whether the substance over form concept is considered. Mixed results are found: in some products, the economic substance is presented in the financial reports, while in other cases, the legal form of the contract is reported. This ambiguity may hinder the faithful representation of financial statements. The Tabarru contract is used to justify the risk-shifting practices by Islamic banks. The accounting effects of such contracts may result in failure to recognize assets or liabilities in the financial reports, earnings management and incomplete financial information for the users of the financial reports.

This study is a response to the call raised by the consultative group established by the International Accounting Standards Board. It provides an additional insight into the accounting treatments for a combination of contracts and Tabarru contracts. It also contrasts the accounting treatments, as stipulated by the AAOIFI, with the conventional accounting frameworks.

This study aims to critically analyze the fundamentals of the current major Islamic Finance (IF) instruments and contracts in light of both the foundations of IF and the concept of substance over form in the accounting conceptual framework. Such analysis is believed to be necessarily for the IF institutions to provide better and more genuine service to their customers.

To achieve the study purpose, the methodology is based on theoretical analysis and analytical review of the major IF contracts.

The IF industry needs to focus on the economic substance of the products offered to their clients. In developing and promoting their products, IF institutions need to focus on the ultimate and substantial goals of Islamic Sharia rather than re-packaging existing conventional products under different arrangements and formats to make them appear as Sharia-compliant to their clients. Both religious scholars and IF professionals need to engage in much deeper analysis and understanding of the substantial design of IF instruments and the concept of usury in modern economy.

This paper does not intend to develop a comprehensive framework for the design of IF instruments to meet the economic substance and ultimate goals of IF principles or measure such economic substance. However, that is definitely a subject for further research.

By applying concepts like substance over form from other business fields such as the accounting theoretical framework to the IF instruments and contracts, we should gain better understanding and practical implications of these instruments and figure out ways to improve their design to be more consistent with and better serve the ultimate goals of the Islamic Sharia.

Accounting practices vary not only across firms, but also across countries, reflecting the respective legal and cultural background. Attempts at harmonization therefore continue to be rebuffed. The purpose of this paper is to argue that different wordings in national laws, and different interpretations of similar wordings in national laws, can be explained by taking recourse to the philosophy of language, referring particularly to Searle and Wittgenstein.

The example of the substance over form principle, investigated in seven countries, is particularly suitable for this analysis. It is known in all accounting jurisdictions, but still has very different roots in different European countries, with European and international influences conflicting, which is reflected in the different wording of the principle from one country to the next, and the different socially constructed realities associated with those wordings.

This paper shows that, beyond accounting practices, the legal and cultural background of a country affects the wording of national law itself. The broad conclusion is that different socially constructed realities might tend to resist any attempt at harmonized socially constructed words.

The paper contributes to the debate surrounding the possible homogenization of accounting regulations, illustrating the theory of the social construction of both “reality” and “language” on the specific application of one common principle to various Member State environments.

Investigates the differences in protocols between arbitral tribunals and courts, with particular emphasis on US, Greek and English law. Gives examples of each country and its way of using the law in specific circumstances, and shows the variations therein. Sums up that arbitration is much the better way to gok as it avoids delays and expenses, plus the vexation/frustration of normal litigation. Concludes that the US and Greek constitutions and common law tradition in England appear to allow involved parties to choose their own judge, who can thus be an arbitrator. Discusses e‐commerce and speculates on this for the future.

A decade ago, we conducted a study (reported inMartens McEnroe, 1992) with the result that auditors neglected substance over form and perceived little exposure to litigation in doing so. The theoretical basis of the previous paper was implicit contract theory. We have had occasion to change our analysis since the previous work; in this paper we focus on the commodification of audits, and trace the neglect of substance over form to that commodification. We present evidence that recent actions by the SEC have altered the perception of auditors that the letter of GAAP (Generally Accepted Accounting Principles) is an aegis against litigation, and that audits which do not opine on substance over form are perfectly marketable commodities. We find, however, that audits which do not opine on substance vs. form are extant, and we cannot conclude that a change in the conditions of production of the audit commodity has occurred or is imminent.

This paper aims to investigate the economic substance of Islamic banks’ transaction as perceived by the employees and regulators of banks and the effect of such substance on the need for special accounting standards for Islamic banks. If there is a distinctive “Islamic economic substance”, then special accounting practices may be necessary such as the standards of the Accounting and Auditing Organization for Islamic Financial Institutions.

A qualitative inquiry on one of the leading Islamic banks in the Middle East was conducted to investigate the economic substance of the bank’s main two transactions; the deposit system and Murabaha financing, as perceived by informants within one of the earliest Islamic banks and its regulators.

It is found that despite the belief that the transactions under examination were different from equivalents within conventional banking, practice within the bank was not consistent with such a belief. Informants largely perceived the economic reality of the investigated transaction as being not different from conventional banks’ transactions, and this would affect the need for special accounting and regulatory frameworks.

This investigation is confined to informants working within one Islamic bank; their views and perceptions may not coincide with those working in other Islamic banks in the world.

The results of this investigation provide policy implications for Islamic banks, regulators and standards setters in regard to the need for special accounting standards for Islamic banks.

The paper is one of the first papers that uses a qualitative inquiry on the main transactions of Islamic banks and the related need for special accounting practices. The paper provides a new perspective on the debate over whether Islamic banking is genuinely innovative or is merely a replicate for conventional banking.

The purpose of this paper is to investigate the role of standard‐setting bodies and rating agencies which compete for authority in Islamic finance. It does so through a consideration of a recent debate over the permissibility of sukuk financing.

The methods used are a combination of archival and bibliographic research, coupled with the author's previous research on Islamic banking and finance.

While the debate over sukuk hinged on whether the structures are shari'a compliant in form only, not in substance, the role of sukuk in neoliberal reform and the privatization of state resources reveal a deeper potential conflict between Islamic standard‐setting bodies and global neoliberal projects more broadly.

The implications are significant for other Islamic finance contractual forms and modes of finance. They are also significant in light of the global financial crisis, and the recent debt crisis in Dubai. The research limitations have to do with the fact that this is a fast‐moving field and the global financial crisis has destabilized many institutions – both conventional and Islamic – in structured finance.

Few scholars have considered sukuk's legitimacy, or the competition between Islamic standard‐setting bodies and non‐Islamic global rating agencies.