Fairly presenting

[Karel]

Hello,

I need some information about 'true and fair view'. The financial statements must FAIRLY present the financial condition of the company. Can someone help me with the evolution in America about the 'fair presenting'?

[harrywaldron]

I'm more of an IT person, so I share very generally here and hope that others will come to the rescue.

To me, "True and Fair" means that you are using realistic and marked based valuations. For example, if a company owns buildings, cars, furniture, etc., they can set a lot of different values for it. Manipulating these values the wrong way could be misleading.

For example, Enron appeared to have far greater valuations on paper than they did in reality. Thus, all SOX valuation methods must be realistic so that it reduces the chance of "cooking the books".

[milan]

GAAP

The GAAP is a set of rules governing accounting. The rules are believed to derive from the Company law, CA 1985, accounting standards, international accounting standards and statutory requirements in other countries, particularly in the US, and the stock exchange requirements.

True and Fair view

True and fair view is not defined in company law or accounting standards. for practical purposes it can mean accurate and not misleading. The company law requires that the balance sheet must give a true and fair view of the state of affairs of the company at the end of financial year. The profit and loss account must give a true and fair view of the profit and loss of the company for the financial year.

The Companies Act states that the directors may depart form any of its provisions if these are inconsistent with the requirement to give a true and fair view. This is commonly known as the 'True and Fair overview'. It has been treated as an important loophole in the law and has been the cause of much argument, and dissatisfaction with the accounting profession.

Hope this further helps,

Milan

coursework.info/i/74800.html

[Chhaava]

It is more appropriate if we weigh True and Fair to True and Correct. It would be risky for a public accountant to provide an opinion of financial statements being true and correct unless he audits 100% of transaction, being impractical. Thus, performing evaluation through due diligence expected from a public accountant can lead to a true and fair opinion only.

If we read SAB 99 we can really infer the logic behind True and Fair Opinion. Bottom line is that True and Fair opinion is sufficient to assist the stake holder to derive requisite inference on financial statements.

I hope that this helps.

[NC]

Concept of true and fair evolved because the concept of "True and Correct" could no longer survive the ever increasing size of businesses. The increase in size of businesses impaired the auditors ability to attest about 100% correctness of the financial records.

Correct, would mean really really correct, fair, on the other hand would mean reasonably correct.

hope this gives some useful info.

cheers

[Denis]

An interesting article re True and Fair here:
frc.org.uk/press/pub0854.html
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