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The 'true and fair view' in financial reporting

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  1. Introduction.
  2. The 'true and fair view' override in the United Kingdom.
  3. 'True and fair view' versus regulation.
  4. The "true and fair view": A myth.
  5. Conclusion.

Originally, one major concept was stressed in the United Kingdom: the ?true and fair view' in financial reporting. This concept was so popular that it even overrode the little regulation that existed then. In recent years, the increase in accounting regulation started to put in jeopardy the status of this concept. Indeed, one may think that true and fair no longer serves a useful purpose as it reflects and is defined only by the rules set. Had it not been for its symbolic role, this principle would have disappeared; still it remains very vivid in British accounting. The notion of a true and fair view has always been central in British accounting. Indeed, in 1947, following the tradition of ?full and fair' statements in the 1844 Join stock Companies Act or ?true and correct' requirements issued in 1900, the Companies Act stated that financial reporting should give a ?true and fair view' of financial statements.

[...] Moreover, those professional recommendations and standards were supposed to reduce diversity in financial reporting practice by favouring compliance, especially given the creation of the FRRP (Financial Reporting Review Panel) which has the power to apply to the court for the revision of accounts that may not give a true and fair view. As a result, the meaning of the concept of true and fair seems to be weakened by this wave of regulation as now statements prepared in accordance with standards (FRSs and SSAPs) are presumptively true and fair while those not so prepared are less likely to be approved as true and fair by the court. [...]

[...] Indeed, the profession tends to stress its very technical, esoteric aspect and cultivate its professional jargon so as to define a universe of accounting to which non-professionals cannot have access, hence legitimating the profession's monopole in financial reporting. By the same token, it stresses the belief that only members of the profession can meet the demand for their knowledge which obviously advantages the profession. Consequently, the ?true and fair view', as well as other major accounting principles, helps accountants to assert their status in the United Kingdom and create a mythical aura around accounting, dazzling those who are not familiar with it. [...]

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