The concept of commercial substance in purchase and sales transactions means that
A)The transaction is a bona fide purchase and sale
B)The entity's cash flows are expected to change
C)The transaction must involve tangible assets
D)(a) and (b)

Question

Quizplus · Accepted Answer

Commercial substance in purchase and sales transactions means that the transaction is a bona fide purchase and sale, and the entity's cash flows are expected to change. This pertains to the economic reality of the transaction, regardless of whether it involves tangible or intangible assets. Therefore, both options A and B are correct, making D the best choice.

The Concept of Commercial Substance in Purchase and Sales Transactions