True and fair override ‘alive and kicking’

True and fair override 'alive and kicking'

True and fair override is still available in very rare circumstances, Accounting Standards Board insists

TRUE AND FAIR override still exists and can be used in exceptional circumstances, the Accounting Standards Board has insisted.

Some stakeholders were worried that the principle of true and fair is missing from International Financial Reporting Standards, potentially resulting in rules-compliant accounts that misrepresent the nature of a transaction.

Chairman Roger Marshall (pictured) said that the ASB’s new four-page paper on the issue is the product of “several months’ work and a lot of consultation”.

“Evidence sessions at the House of Lords audit inquiry clearly demonstrated that people are still worried about true and fair, but they shouldn’t be,” he said.

UK GAAP contained a separate standard requiring accounts to reflect the true or “economic” nature of a transaction rather than simply its legal form. For example, when accounting for a contract with an option on it, ignoring the option in favour of a strict legal definiton would result in the “wrong answer”. In such circumstances, a true and fair override might be necessary. However, IFRS does not include such a clause, which has led to stakeholder concern.

Marshall said that the option “was very occasionally used under UK GAAP and may be very occasionally used under IFRS”. National Express’s joint pension scheme is one such example and more could present themselves as financial services evolve.

The ASB said that the new paper will draw together the guidelines on true and fair reporting and remind preparers and auditors of accounts that the requirement “remains of fundamental importance in both UK GAAP and IFRS”.

Share

Subscribe to get your daily business insights

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata
Professional Services

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

3y

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

3y

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine
Accounting Firms

Turn Accounts Payable into a value-engine

3y

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021
Making Tax Digital

Digital Links: A guide to MTD in 2021

3y

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource