Importance of â€˜True and Fair View of Financial Statements Introduction This essay focuses on the definition of the â€˜true and fair viewâ€™ and how to use in accounting practically. In my opinion, â€˜true and fair viewâ€™ is essential in the real world of accounting because the company has to provide reliable and relevant information to demonstrate its actual financial situation in financial report. However, from December 2013, the â€˜true and fair viewâ€™ is not defined in Corporations Act s. 295(4)(d) and other regulations or legislations. This is because it has been a controversial debate towards whether the exact nature of â€˜true and fair viewâ€™. Therefore, the following essay will explain the importance of the â€˜true and fair viewâ€™ in terms of the appropriate disclosure of material matters in financial statement and the frustration in terms of the definition as well. What is True and Fair? The â€˜true and fair viewâ€™ concept is one of two competing but not mutually exclusive legal standards for financial reporting quality that have been subject to debate on their meaning, use and importance. The other is â€˜present fairly in conformity with generally accepted accounting principlesâ€™ (GAAP). The mainly prescriptive literature suggests that each regime that requires compliance with â€˜true and fair viewâ€™ tends to address and interpret the concept according to specific historical, social, cultural, political and economic roots and environments (Deegan Michael 2012). The nature of truth, whether absolute or relative, it is the existence of a reality, an unquestionable thing, or as an abstract concept, either dependent or independent of believers. The interpretation equated with the truth and fairness to the relevance together with adequate disclosure in financial report. In accounting concept, â€˜True and fair viewâ€™ indicates that the financial statement must not contain material misstatement and actually reflect the financial performance and position on the company(Deegan Michael 2012). To be specific, â€˜Trueâ€™ means the financial statement accord with the reality and formal reporting framework such as conceptual framework and free from any unreal information which could mislead the users. â€˜Fairâ€™ means the information in financial statement do not include any personal prejudice or bias thus it could reflect the economic substance or transaction. The Importance of True and Fair in Accounting The Corporations Act requires the accountants to provide true and fair information so that the accounts of the company can convey a true and fair view explicitly. Under s. 297, it is required that the financial statements and notes should to give a true and fair value of the entityâ€™s financial position in the financial year. Moreover, s. 308 requires auditors to give a true and fair view in the annual financial statements and comply with accounting standards. Beside to the Corporations Act, Chastney (1975) suggests that fairness means that, in order to achieve a true and fair view financial reports should present information both impartially and in a manner that a reader can understand clearly. The concepts of truth and fairness are of great significance to ensure the accounting information to be reliable. The information reflected in the financial repot includes the measurements of assets and liabilities, the calculation of profit and capital, as well as the actual quantities involved in business activities (Ryan 1988). The information disclosed in financial statements should be fair to shareholders, public and other related stakeholders. Thus, directors and auditors in a company have an obligation to comply with the â€˜true and fair valueâ€™ in all accounting activities. For example, four particular information should be disclosed in the financial statement. These information are required to be true and fair to reflect the financial performance and position of the company. The four information needs are:capital maintenance, stewardship. Liquidity and net realizable value. From the perspective of true and fair, these four information are required as follows: Capital maintenance need to satisfy the needs of shareholders for disclosing the annual profit legally available for dividend, retained profit and the amount and form of paid-up capital. Stewardship need to satisfy the needs for disclosing the results achieved by directors from the use of funds and whether the investment are following the objective of the company (Power 2010). Liquidity are quired to serve as an indication to the solvency. The information should clarify the abilities of companies to met liabilities in short term, the amount of bank overdraft and the amount of any securities to secured companyâ€™s debts (Chastney 1975). Net realizable value disclosure are needed to make sure shareholders do not sell their shares which are parts of net realizable value but was available to the company. Under these interpretations, the measurement of periodic profit based on detail monetary model, which elaborate the demand and actual application of how fairness reflected in the financial statement (Gaffikin, Dagwell Wines 2004). Moreover, all the measurements should be internally consistent and comply with the applying of the accounting System.The value of the true and fair view also reflect the compliance of the transactions with relevant regulations, statutory provision and other accounting standard. For example, the accounting policies applied in the organization should be appropriate to a accompanyâ€™s business, and the acquirements and recommendations in accounting standards can be practical in the use of achieving companyâ€™s actual financial objectives (Aisbitt Nobes 2001). Specially, AASB 1001 requires the accounting policies should to ensure the substance of the underlying transactions or other events , satisfying the concepts of relevance and reliability (AASB). This demands the actual economic nature and effect of the events to be reported. At last, the truth and fairness also make contributions to the companyâ€™s decision making. This is because the relevance and reliability has been ensured and the managers can predict the future perspective according to the useful information reported in the financial statement (Ijiri Jaedicke 2004). How to define True and Fair? However, True and fair concept is not yet defined by authority, also some way to define that in view of its relationship to the various components of a true and fair. (Lee, 1982) There is also no legal concept prescribe the notion of true and fair. Sometimes the application of â€˜true and fair valveâ€™ go far beyond of technical rules of accounting (Aisbitt Nobes 2001). For example, stemming from the meaning of â€˜compliance with the factsâ€™, â€˜truthâ€™ refers to â€˜empirical correspondenceâ€™ in accounting terminology. But in practical accounting, the value of truth is not limited to its literal definition. It also expand to deductive validity in audit process. Further more, the application of fair also involved in the appropriate general accounting model for measurement of periodic profit and capital. That is to say, there is no fixed standard to rule what is exactly the meaning of â€˜true and fair valueâ€™ in practical accounting. On the other hand, although true and fair view is really essential in accounting framework, however, in real life sometimes it is quite hard for the accountant to make absolute right decision in terms of following absolute truth and fairness. For example, in the process of determining the depreciation, several methods are available such as declining balance method, maximum amount method, multi-level method and the basic method (Ryan 1988). In most cases, several options are accessible and reasonable, but different methods could lead to different calculation answers, affecting the estimation of companyâ€™s financial performance. When the accountant put the formula into the reality, they have to take into account the companyâ€™s position and financial performance target, then making the optimal decision (Lee 1982). In this situation, the concept of â€˜true and fair viewâ€™ do not have fixed rules and the accountant may use the professional judgment to make the final decision. Conclusion To conclude, true and fair value are of great concern in accounting, especially in financial statements. The idea that true and fair value measurement is part of professional identification in terms of the releasability and relevance of the information disclosed in the financial report. However, in most cases, the technical standard setting of true and fair value are not obvious and uniform, which address impediment to real practicability of the interpretations. This is because the notions of relevance and reliability cannot be defined independently of the whole accounting system and are always subject to changes (Power 2010). Reference list Aisbitt, S Nobes, C 2001, â€˜The true and fair view requirement in recent national implementationsâ€™, Accounting and Business Research, vol. 31, no. 2, pp. 83-90 Australian Accounting Standard Board 2010, Complied AASB Standard AASB 117, Australian Government Australian Accounting Standards Board, Australia. Chastney, JG 1975, True and fair view: a study of the history and meaning of true and fair and a consideration of the impact of the fourth directive, Institute of Chartered Accountants in England and Wales, London Deegan C., 2012 Australian Financial Accounting, 7th ed, McGraw-Hill, Nth Ryde GaffikinÃ¯Â¼Å’ MÃ¯Â¼Å’ DagwellÃ¯Â¼Å’ R WinesÃ¯Â¼Å’ G 2004Ã¯Â¼Å’ Corporate accounting in AustraliaÃ¯Â¼Å’ 3rd editionÃ¯Â¼Å’ University of New South Wales Press LtdÃ¯Â¼Å’ NSW Ijiri, Y Jaedicke, R 2004, â€˜Reliability and objectivity of accounting measurementsâ€™, The Accounting Review, vol. 41, no. 3, pp. 471â€“483. Lee, TA 1982, â€˜The will-o-the-wisp of true and fairâ€™, The Accountant, vol. 187, no. 5601, pp. 16-18. Power, M 2010, â€˜Fair value accountin: financial economics and the transformation of reliabilityâ€™, Accounting and Business Research, vol. 40, no. 3, pp. 197-210. Ryan, JB 1988, A True and Fair View: A Revised Accounting Interpretation, University of Wollongong, Wollongong
The wizard of Oz - Essay Example Particularly, the paper will analyze the scene in which the Wicked Witch, the stories main antagonist, was killed through her own machinations in the famous â€œIâ€™m meltingâ€ scene. The sepia-toned setting of the Kansas prologue in the Wizard of Oz is famously contrasted with the splash of full color that the movie introduced as we enter Dorothyâ€™s dream. The world of the dream is meant, we are supposed to believe, to represent an alternative universe. Yet director Fleming draws from the real world political and economic landscape of the late 1930s in building this supposed alternate world. Particularly, he establishes two worlds â€“ one with a kind of goodness and innocence that, though it has its own brand of hypocrisy and silliness, is presumed superior to the second, a dark and scary world of evil that lurks about the filmâ€™s edges in the person of the Wicked Witch and the setting associated with her. As the film progresses we see that even the scenes in which a kind of injustice can be discerned in the sleek modern City of Oz -- through, for example, the Wizard making promises he has no intention of keeping â€“ are carried out in a golden bathing light of modernity and technological wonder. This is strongly contrasted with the Witchâ€™s castle which, with its gothic arches and ancient, minimalist architecture seems to be inspired by old world, specifically German, influences. The suggestion is the American world is preferable to the European even in its failings. In building the mise-en-scene for the two contrasting worlds, Fleming utilized a full range of color and light in the City of Oz scenes, as well as for the march along the beautiful if sometimes difficult travel on the yellow brick road. However, in the scenes that are associated with the witch, -- such as the forest scene and castle scene â€“ the color palette is darkened and limited. The black of the witchâ€™s cloak is contrasted with the blue of Dorothyâ€™s dress and bright red of the coveted shoes in many shots in these settings. The uniforms of the zombie-like soldiers that serve the witch resemble Nazi officersâ€™ uniforms. The green-faced witch herself, in the make-up choices made, suggests a kind of sickness and moral decrepitude, contrasted against Dorothyâ€™s fresh innocence. Nathanson (1991) contrasts the two worlds of the City of Oz and Witchâ€™s Castle in excellent summary form. After, describing Oz as an American â€œfuture anticipated in the presentâ€ he describes the setting of the witchâ€™s castle as follows: Technology here is primitive. Candles and torches are used instead of electric lights, spears instead of guns, and an hourglass instead of a clock. Surfaces, moreover, are coarse and unpolished. Architecturally, the Castle is a maze of twisting staircases and crooked passages. Here, then the mise-en-scene is alien. It is remote in both time and space. (p. 39) Here the setting of the action is made to resonate with the world of the late 1930s in which the world was moving steadily to war â€“ with the American promise of technology being questioned and challenged (potentially) by the reactionary and agrarian aggressiveness of Hitlerâ€™s Nazi Party. While such a comparison is not made explicit in the film, it is almost inescapable when looking back on the film as a piece of cultural history.