True and fair view of financial statement

[Yakub02]

The statement of financial position must give a true and fair view of the state of affairs of the company as at the year end and the profit or loss account must give a true and fair view of the profit or loss of the company for the year. The true and fair requirement is of overriding importance: (a) Additional information must be provided, if necessary, for the financial statements to give a true and fair view. (b) If, owing to a special circumstance, compliance with an accounting requirement results in a failure to show a true and fair view, the directors must depart from that requirement in preparing the statement of financial position or profit or loss account (so far as necessary), in order that the financial statements achieve a true and fair view. In this case, the following must be disclosed in a note to the accounts:

particulars of the departure;
the reasons for it;
and its effects.

Every company must prepare a directors’ report which must contain the following:

(a) a fair view of the development of the business of the company and its subsidiaries during the year and of their position at the end of it;

(b) the amount (if any) which the directors recommend should be paid as dividend and the amount (if any) which they propose to carry to reserves;

(c) the names of the persons who were directors of the company at any time during the year;

(d) the financial activities of the company and its subsidiaries in the course of the year and any significant change in those activities in the year;

(e) particulars of significant changes (if any) in the fixed assets of the company in the financial year; (f) the difference between the market value of land and the amount at which it is recognised in the statement of financial position if, in directors' opinion, the difference is of such significance that the attention of members or debenture holders;
The statement of financial position must give a true and fair view of the state of affairs of the company as at the year end and the profit or loss account must give a true and fair view of the profit or loss of the company for the year. The true and fair requirement is of overriding importance: (a) Additional information must be provided, if necessary, for the financial statements to give a true and fair view. (b) If, owing to a special circumstance, compliance with an accounting requirement results in a failure to show a true and fair view, the directors must depart from that requirement in preparing the statement of financial position or profit or loss account (so far as necessary), in order that the financial statements achieve a true and fair view. In this case, the following must be disclosed in a note to the accounts:

 

[Yakub02]

Self-review threats

Self-review threats occur when a previous judgement needs to be re-evaluated by members responsible for that judgement.

For example, where a member has been involved in maintaining the accounting records of a client he may be unwilling to find fault with the financial statements derived from those records. Again, this would threaten the fundamental principle of objectivity.

Circumstances that may create self-review threats include, but are not limited to, business decisions or data being subject to review and justification by the same chartered accountant in business responsible for making those decisions or preparing that data.


Advocacy threats A chartered accountant in business may often need to promote the organisations position by providing financial information.

As long as information provided is neither false nor misleading such actions would not create an advocacy threat. Familiarity threats Familiarity threats occur when, because of a close relationship, members become too sympathetic to the interests of others.


Examples of circumstances that may create familiarity threats include: i.

A chartered accountant in business in a position to influence financial or non-Financial Reporting or business decisions having an immediate or close family member who is in a position to benefit from that influence. ii. Long association with business contacts influencing business decisions. iii. Acceptance of a gift or preferential treatment, unless the value is clearly insignificant