True and Fair View

2496 WordsApr 26, 201310 Pages
The Meaning Of ‘True and Fair’ The expression ‘true and fair’ is one of the most common expressions used in the financial industry today. It is used to describe the required standard of financial reporting but equally to justify decisions, which require a certain amount of arbitrary judgement making. It is the principle that is used in guidelines ranging from auditing and financial standards to the company law acts. The term originated … The aim of the financial statements is to report to the shareholders on the financial position at the year-end, and the performance of the company over the year. They are also important for tax computations, for management decisions and quotations from lending institutions. Thus,…show more content…
This gain should not be recognised again on the sale of the asset. However, the directors argued that this would mean that the only profit shown would be the increase in capital in the year of sale. Even after the UITF reviewed the situation and issued a reviewed ED for companies with slowly maturing assets, Coillte maintained its format and the ICAI failed to intervene. The author then explains this: ‘There is no information excluded that otherwise would have been reported under the FRS 3 policy. Disclosure is not the issue.’ Therefore, how the information is presented can be persuasive, not just that it was omitted entirely. The ASB recognises (SOP, 1999, page 10) that: The presentation of information in financial statements involves a high degree of interpretation, simplification, abstraction and aggregation. Thus the issue comes down to what is the ‘true and fair’ nature of events as judged by the directors and the auditors. Unfortunately consensus can be almost impossible to come by: Preparers need to take a far more active role in standard-setting. Only when preparers express their views, presumably based on a need to communicate better with shareholders, will accounting standards begin to improve. (Chisman, 1998) Materiality & Risk SAS 220 states (page 2): ‘ a matter is material if its omission would reasonably influence the decisions of an addressee of the auditors’ report. Likewise a
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