Financial statements whenever shown for a company must present its financial position, financial performance and cash flows fairly. But what fair really means?
A true and fair view is something that’s often talked about when the financial statements are presented, but what does it really mean? The figures are correct, what more is there? Truth be told, with the figures being correct, one part of a true and fair view is done. Now it’s the presentation of them – grouping, showing in enough detail, with enough additional information etc. The aim of the financial statements is to give the readers of the reports all relevant information so that they could base their opinions and decisions. Define the readers of your reports and I’m sure you’ll realize the level of depth of information that should be disclosed. How would you reach true and fair view though in both those aspects?
One option is to state that if the accounts and presentation of them complies with the local accounting policies, the statements are presented true and fair. I would say that this is true in case the accounting policies have been written mostly based on IFRS and don’t differ much from them. Why? IFRS being the international financial reporting standards means that they are considered as the accounting foundation worldwide. Everyone who is dealing with accounting knows IFRS and the requirements of it.
Ensuring that your financial statements give a true and fair view isn’t all that difficult. Just consider the “audience” of the reports and say more rather then less as additional information. Of course you always have to consider your business secrets etc. so there’s always this fine balance to keep when it comes to true and fair view.