68 ACCOUNTING FOR MANAGERS
Although the requirement for a true and fair view is subjective and has never been
tested at law, it takes precedence over accounting standards.
Accounting standards are principles to which accounting reports should con-
form. They are aimed at:
žachieving comparability between companies, through reducing the variety of
accounting practice;
žproviding full disclosure of material (i.e. significant) factors through the judge-
ments made by the preparers of those financial reports; and
žensuring that the information provided is meaningful for the users of finan-
cial reports.
However, a criticism of the standards is that they are set by the preparers
(professional accountants) rather than the users (shareholders and financiers) of
financial reports.
Financial Reporting Standards (FRSs) are issued by the Accounting Standards
Board (ASB) and Statements of Standard Accounting Practice (SSAPs) were issued
by the Accounting Standards Committee, which preceded the ASB. FRSs and
SSAPs govern many aspects of the presentation of financial statements and the
disclosure of information (for a detailed coverage, see Blake, 1997). Examples of
commonly applied standards include:
SSAP9 Stocks
SSAP13 Research and Development
SSAP21 Leases
FRS10 Goodwill
FRS12 Provisions
FRS15 Fixed Assets and DepreciationA Financial Reporting Review Panel has the power to seek revision of a company’s
accounts where those accounts do not comply with the standards and if necessary
to seek a court order to ensure compliance.
Interestingly, the US equivalent of the true and fair view is for financial
statements to be presented fairly and in accordance with Generally Accepted
Accounting Principles (or GAAP). There is a move towards the harmonization
of accounting standards between countries through the work of the International
Accounting Standards Board (IASB). This has been a consequence of the global-
ization of capital markets, with the consequent need for accounting rules that can
be understood by international investors. The dominance of multinational corpo-
rations and the desire of companies to be listed on several stock exchanges have
led to the need to rationalize different reporting practices in different countries.
In Europe, all listed companies of member states of the European Union have to
comply with IASB standards by 2005.