Exceptions do not Change the Rule: Substance Overrules Form in Us GAAP
The SEC has the statutory authority under the Securities Exchange Act of 1934 to establish financial accounting and reporting standards for publicly-held companies. In turn, without abdicating its authority, the SEC has historically relied on the accounting profession to develop accounting principles. These principles must faithfully represent the economic conditions of companies and economic substance of transactions and must not result in misleading financial statements. To this end, the SEC has consistently challenged filings and brought legal actions against filers, their officers, and auditors when financial statements do not reflect the economic substance (and are hence deemed to be misleading). As such, US financial reporting does not allow form to dominate substance except for a few limited instances.