True and fair view a cornerstone says FRC

The concept of the ‘true and fair view’ remains a cornerstone of financial
reporting and auditing in the UK despite the adoption of international financial
reporting standards, the Financial Reporting Council has said.

The FRC today published its analysis of the implications of the new
accounting and auditing standards on the ‘true and fair view’ and auditors’
responsibilities.

In a statement, it said that the introduction of ‘presents fairly’ into the
accounting framework by the adoption of IFRS and International Standards on
Auditing would result in changes to the format and content of both company
accounts and audit reports.

It outlined three points: that the concept of the ‘true and fair view’
remained a cornerstone of financial reporting and auditing in the UK; that there
had been ‘no substantive change in the objectives of an audit and the nature of
auditors’ responsibilities’; and that the need for professional judgement
‘remained central to the work of preparers of accounts and auditors in the UK’.

It added that the move to IFRS would result in changes in key measures such
as profit and net assets, the format of financial statements, and the
terminology used in statements.

‘One change in terminology that has received particular prominence is the
replacement of “true and fair by fair presentation” as the over-arching test
that financial statements should satisfy’, the statement added.

Sir Bryan Nicholson, chairman of the FRC said: ‘This analysis provides useful
guidance to preparers, auditors and users of financial statements on the
implications of recent changes to financial reporting in the UK.

‘Our analysis provides reassurance that, notwithstanding the changes that
have taken place, the framework for financial reporting and auditing remains
robust. The FRC is committed to facilitating a clear channel for all stake
holders to participate in the debate on the future evolution of the framework.’

The FRC is inviting views on both its analysis of the current framework for
financial reporting and auditing in the UK and how they should evolve in the
future.

Views on the future development will be taken into account in the account in
the development of the FRC’s plan and budget for 2006/7 which is expected to be
published in January 2006.

Responses on both the analysis of the current financial reporting and
auditing framework and how this might evolve in the future should be sent to
[email protected]
or in writing to Paul George, Financial Reporting Council, Aldwych House, 71-91
Aldwych, London WC2B 4HN.