The True and Fair View Requirement: Impact on and of the Fourth Directive

Abstract

The overriding British legal requirement for financial reporting of giving ‘a true and fair view’ (TFV) has been exported to continental Europe via the European Community's (EC) Fourth Directive on Company Law. This paper considers accounting rules in continental Europe before this process, and traces the gradual acceptance of the predominance of TFV in the drafting of the Directive after UK accession to the EC. The signifiers used in different European languages in the various drafts of the Directive are examined. It is noted that all (eight) other versions contain only one adjective (generally equivalent to ‘faithful’) rather than true and fair. The origins of the Dutch getrouw, the French fidèle, etc. are looked into. As the Directive evolved, and particularly as it was implemented in the twelve EC states, greater linguistic variety emerged, such that five countries changed the wording from the original Directive and two others qualified the wording. Whether this affects what TFV signifies is investigated. Countries can also be divided into several groups with respect to the effects of having the TFV in law. The extremes appear to be the UK and Germany.