When preparing accounts, there is a legal requirement under the Companies Act (derived from EU accounting directives) that they show a true and fair view.  Observers had expressed the view that the use of IFRS will not enable this legal requirement to be achieved.  

Having sought once again their own independent legal opinion, the FRC and BIS have confirmed that “compliance with accounting standards will result in a true and fair view”.  Where this is not the case, IAS 1 Presentation of Financial Statements paragraph 19 and FRS 102 The financial reporting standard applicable in the UK and the Republic of Ireland paragraph 3.4 allows that where compliance with an accounting standard may not achieve that objective, the standard may be overridden. 

The FRC will continue to work towards the improvements of accounting standards and will be contributing to the debate towards the development of the Conceptual Framework, a comprehensive project of the International Accounting Standards Board (IASB).  

The FRC and BIS believe that further improvements can be made to IFRSs and the Conceptual Framework for financial reporting, although these changes are not required to enable existing accounting standards to comply with UK company law.  

They believe that stewardship reporting should be included as a “primary objective of financial reporting” in the Conceptual Framework and prudence should be explicitly mentioned.  Both also believe that “clear principles are needed to describe when specific approaches to measurement, such as fair value, should be used”. 

Click for:

• FRC press release (link to FRC website).
• FRC independent legal opinion (link to FRC website).
• BIS press release (link to BIS website).
• UK Accounting Plus project page on the IASB's Conceptual Framework project
• Conceptual Framework Bulletins