The true and fair view and the ‘fair presentation’ override of IAS 1

Abstract

This paper examines the ‘fair presentation’ requirement and the override in International Accounting Standard 1. The paper's objective is to attempt an explication of the nature, role and status of the override and to make recommendations regarding its application. The author examines the wording of the relevant provisions in IAS 1 and compares and contrasts these with other regulation containing similar concepts, such as the European Union's fourth directive, UK and German law and US regulation. The ensuing discussion is centred around three interrelated themes: the hierarchies of (legal) rules in different legal systems, the relationship of ‘fair presentation’ to IASC/B pronouncements and the status of the override in IAS 1. It is argued that the override is considerably weaker than the true and fair view override in the EU's fourth directive and the UK's Companies Act, and that its role is not likely to go beyond that of a legal residual clause. The paper finally provides some initial evidence that the override is likely to be interpreted in this way in at least some countries, and recommends that a wider interpretation should not be sanctioned by the International Accounting Standards Board, nor by those charged with the enforcement of International Accounting Standards.