This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

FRC publishes document reconfirming that the presentation of a true and fair view remains a fundamental requirement of financial reporting

  • FRC Image

04 Jun 2014

The Financial Reporting Council (FRC) has today published a document (“the document”) which reconfirms that the presentation of a true and fair view remains “a fundamental requirement in financial reporting” under both International Financial Reporting Standards (IFRSs) and United Kingdom Generally Accepted Accounting Principles (UK GAAP).

In October 2013, the FRC and the Department for Business Innovation and Skills (BIS) confirmed that the current legal framework requires companies to present a true and fair view.  In light of this, the document published by the FRC highlights the application of the true and fair requirement under IFRSs and UK GAAP.

The document highlights the relevance of the true and fair requirement to preparers, those charged with governance and auditors.

The document highlights:

  • That when preparing accounts “objective professional judgement must be applied to ensure that financial statements give a true and fair view”.  
  • The importance of prudence, something which the IASB is now proposing to reintroduce into the Conceptual framework, in the preparation of accounts prepared under IFRSs and UK GAAP and its contribution to the concept of true and fair. 
  • That transactions should be accounted for in accordance with their substance rather than legal form if accounts are to show a true and fair view.  The FRC comment that “it would be difficult for accounts to present a true and fair view if form had overridden substance”.
  • That compliance with accounting standards and additional disclosure to fully explain an issue “in the vast majority of cases” 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 requires that where compliance with an accounting standard may not achieve that objective, the standard may be overridden.  The FRC has commented that were a company departs from a standard in order to give a true and fair view and a proper explanation is given of the reason for the departure and its effects, it will “be reluctant to substitute its own judgment for that of the company’s board unless it is not satisfied that the board has acted reasonably”. 
  • That if auditors are to discharge properly their legal and professional responsibilities, “they should stand back as they approach finalisation of those accounts and consider whether, viewed as a whole and in view of the issues that they have addressed in the course of the audit, the accounts do indeed give a true and fair view”.

In concluding, the FRC expects preparers, those charged with governance and auditors:

Always to stand back and ensure that the accounts as a whole do give a true and fair view;

To provide additional disclosures when compliance with an accounting standard is insufficient to present a true and fair view;

To use the true and fair override where compliance with the standards does not result in the presentation of a true and fair view; and

To ensure that the consideration they give to these matters is evident in their deliberations and documentation.

Click for:

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.