‘Presents fairly’ or ‘true and fair’

 UK audit opinions proclaim that financial statements give a ‘true and fair’ view, whereas in the USA they ‘presents fairly’ the financial statements.

What is the difference between these two opinions? Are for instance financial statements in the UK more accurate than those in the USA because they are not only fair but true? Using simple English this must be true. Both are fair but only one is true. Another subsidiary question is: what extra work do auditors do to make this additional claim? The answer is: nothing at all.

To show I am not making this up, in June 2014 the Financial Reporting Council wrote in a paper headed True and Fair:

“Fair presentation under IFRS is equivalent to a true and fair view.”

So in practice there is no difference at all between the two terms. Yet another silly trick accountants make on the users of financial statements.

It is true that the origin of the trick arose from the United Kingdom Companies Act of 1948 which put the ‘true and fair’ concept  into law, but never defined ‘truth’ and ‘fairness’ in accounting terms. Accounting intellectuals have been trying to define it ever since. Many countries in the world, those that preparing financial statements under IFRS also decided on the true and fair concept, even if they don’t really know what it means: because there is no definition. And to complete the trick, in opposition, the Americans decided on ‘presents fairly.’

We now have two opposing camps saying different things that mean the same. I would have thought this would be the subject of discussion between the two accounting bodies. Let’s be clear and transparent instead of confusing. But of course it is not. And never will ever be. They want to keep the trick alive!

Leave a Reply