Contemporary issues in Accounting True and Fair View Concept

Question: What is the History of the TFV,How did it Come about, Where, and when,What has been this Historical Purpose of the TFV? Answer: Introduction True and Fair View (TFV) as an accounting concept has since past been necessary for evaluating the performance of businesses (Jones Wolnizer, 2013). It is, therefore, the responsibility of the directors of different business entities to promote and make sure that their financial reports and statements depict a true and fair view of their stakeholders and other users. In auditing, true and fair view means that every financial declaration of any business entity is free from the possibility of any misstatements of their material and genuinely represents the financial worthiness and status of the business organization (DragnevaMillan, 2014). From the literature perspective, the concept of true and fair aspect in accounting has not been defined but a general conclusion of its meaning can be induced, an argument that forms that basis of this paper. According to Burlaud (2011), true means that every financial statement presented is factually correct and that it has been prepared in agreement with the reporting financial frameworks, rules, and standards. It includes IFRS and any other that lacks evidence of the misstatements in their materials that can miss-guide the users of the financial reports. These misstatements are caused by material errors or emission of some transactions and imbalance in the presented financial reports and statements (Epaves, 2010). On the other hand, fair means that the presented financial statements of the business entity faithfully present the information without any issue of biasness for they are the reflection of the economic implications and status of transactions and not just their usual law form according to Hulle (2013). According to Nobes (2016), the true and fair view of financial statements preparation is the responsibility of all directors of company as stated in the corporate legislations and rules of moststates such as the UK Companies Act 2006. Secondly, it is also the responsibility of auditors to ensure that the directors have effectively attained their rolesand responsibilities of the true and fair view financial statements preparation. Hulle (2013) also points out that the managers should expressly indicate or state in their audit reports whether in their view, the financial statements presented to them by directors present a true and fair view of the financial performance and position of their organization. The concept of true and fair view has been adopted since it was introduced in the 1948 UKs Companies Act. The concepthas thus held an historical origin in the 18th century after which it was translated into legal corporate definition in the 20th century (Alexander, 2012). The general essence of the standards and guidelines was to provide the possibility of recognition, measurements, representation, and directors disclosure of particular aspects of financial reporting in a mannerreflectingthe economic reality and thus providing a true and fair view. Evans (2013) also denotes that the accounting transfertechnique from one traditionalvalue to another has been faced or associated with many challenges due to different objectives and goals within the financial reporting, standards and legal systems in different countries and also in different roles of the profession. Therefore, these challenges have resulted from the different conceptualization of the concept of TFV in various countries. T he primary reasons for the difference are due to the difference in legal interpretation of the rules of the Roman law. Alexander (2012) points out that a common legal specific rule, in this case, the Roman law states, specific rules that take prudence over the other general issues. Secondly is the difference in the translation of the TFV phrase, which caused an inherent ambiguity (Nobes, 2016; Alexander, 2013; Nobes, 2012). These translations made the process of conceptualization of the true and fair view to be an ambiguous process. There was also the issue of some of the recognised true and fair concept definitions be obtained from operated terms previously used in describing the relevance and nature of the financial statements (Barlev Haddad, 2017). Lastly, there was also a difference in authority and character of the regulation between federal governments and the use of different accounting principles which causes a difference in the content and validity of any legal and professional pronouncement. Research also shows that the language used in financial reporting is an important tool for decision-making in the worldcapital globalization process where true and fair view (TFV) acts as a symbol of systems stability according to Jones and Wolnizer (2013). For ex ample, the western culture and ideologies of true and fair view was accepted in Poland be used in accounting communities and businesses to promote a fast-track accession in the world competitive markets. The origin of TFV also accounts to the fourth directive of the European Union which stated that, any annual account should conform to all the principles and guidelines of the proper and regular accounting (draft article 2,(2) ). During a negotiation between the European Commission and the Economic and Social Committee (ESC) in the Council Working Party 1974, the usefulness of TFV was questioned. Some delegates, however, supported the idea while insisting that there should be a requirement that will help in departing from the suggestions and provisions of the directive if necessary in order to satisfy the objective of the true and fair view (Wustemann, Kierzek, 2016). Each member state had been affected by certain implications of the European harmonization as each had its true and fair view before the fall out of the fourth directive. Secondly, the creation of a harmonized true and fair view requires the necessity ofchanging to a GAAP with the aim of constructing a common meaning. Res earch has shown that the context of European harmonization has seen the attempt of transferring a formula that consists of words which does not ensure that it is signified form of the formula. In such a case, (Sapkauskiene, 2014) denotes that the collection of normally accepted principles of accounting with accepted wisdom concerning the roles and value traditions of accounting. In practice, Wustemann and Kierzek (2016) point out that the words adopted are not relevant, and that the process of harmonization can only be attained when only the signified are harmonized through a signed agreement on the accepted accounting principles. External to the operational sense, Drabkova (2013) also asserts that the indeterminate knowledge base has specific responsibilities in establishing a professional standing. The scope supports that a true and fair view may be adopted as embodying a claim by accountants to a special knowledge, which in turn supports their claim of exclusive certification. In such a case, the professionals may raise issues concerning the true and fair view in a manner that is quite distinct from the operational reality. The review takes place in the context of the import of true and fair view into the Economic Commission Fourth Directive. The question hence comes as to whether the present requirements of Australia regulatory environment for, financial reporting, supports the true and fair view. The support in this case relates to the preparation of financial statements, the auditing of the statements and the usage of the financial reports. The Australian Financial Reporting standards (AFRS) requires and supports TFV in that all financial reports should be accompanied by a directors about the operations of the company or business entity. It is also required that the financial reports should also be accompanied by a directors declaration stating that the accounts meet the requirements of the accounting standards and give a true and fair view of the business financial statement. The Australian financial reporting standards also support the true and fair concept by giving guidelines on the auditing of financial statements. The financial statements should be prepared and audited according to the international auditing standards, therefore in this case supporting the principle of fair and true representation of financial statements as stated in the true and fair view concept. According to (FRS 102 section 10 and IAS 8) managers and directors are also given guidelines on establishing accounting policies, which can only be allowed under the international accounting standards (Drabkova, 2016). They should not use detailed accounting rules as excuses for accounting malpractices or problems and should also ensure that significant accounting information is not in any way obscured by immaterial or irrelevant disclosure. Financial reporting standards (FRS 102 section 2) managers and directors are also required to give prudent judgments in their consideration of accounts which supports the concept of true and fair view. IAS 1 paragraph 24 also explains that most of the times an accounting policy would conflict with the objective of the financial reports and statements when it does not represent genuinely the transactions. The section also requires disclosure where the true and fair override from a particular requirements so as to achieve a fair presentation. Lastly the companies Act 2006, sections 393(2) and 495 to 497,guides the opinion of auditors regarding companys financial records as to whether in their view the accounts give a true and fair view (Burlaud, 2011). The section therefore supports the true and fair view concept which requires auditors opinion when reporting on the validity and relevance of the financial statements and reports. Conclusion Though the development and harmonization of TFV concept have been faced with a lot of challenges, its importance has been equally supported in enhancing the quality reports and financial statements which have helped to propel a lot of business entities globally. Factual and unbiased information will always present a reliable data and hence the general importance of the true and fair view. However, the concept should be applied to the accounting standards of a certain country for it to have a greater importance. The managers and directors of companies should, therefore, ensure that all financial statements and reports reflect a true and fair view concept. 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