Latest Expert Exchange Queries

GST Demo Service software link:
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Popular Search: ARTICLES ON INPUT TAX CREDIT IN VAT :: VAT Audit :: Central Excise rule to resale the machines to a new company :: cpt :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: empanelment :: TDS :: TAX RATES - GOODS TAXABLE @ 4% :: list of goods taxed at 4% :: articles on VAT and GST in India :: form 3cd :: due date for vat payment :: ACCOUNTING STANDARD :: VAT RATES :: ACCOUNTING STANDARDS
News Headlines »
 7 Tax-saving investments for the risk averse
 5 Tax tasks you should complete before March 31
 March 31 deadline nears: Check out these last-minute tax-saving investment options
 How to file income tax returns online without having Form 16 in 10 simple steps
 Deadline For Filing Income Tax Return (ITR) Is Just 11 Days Away: 10 Latest Details To Know
  10 incomes you need not pay any tax on
 How To File Income Tax Returns In Three Steps By March 31, 2018
 10 things about income tax every taxpayer should know
 What to do if your TDS is not deposited with the government
 What if you forget to verify your Income Tax return?
 TDS on rent and other tax tasks to complete before March 31

Ensuring `faithful representation' in financial reports
August, 31st 2006
The IASB and the FASB have brought out a discussion paper on the qualitative characteristics of decision-useful financial reporting information. `Reliability' came out very strongly as being one of the key characteristics Financial statements are being churned out by companies at quarterly intervals, thanks to listing regulations and the corporates' intention to give shareholders an update on performance. The moot question is: What do the users of financial statements expect from them in terms of qualitative characteristics? An immediate answer could be that this would depend on the user the lay shareholder would expect to know details about the future of the company, while the analyst would concentrate on the fine-print to give his recommendation to clients. One factor everyone expects from the financial statements is reliability. IFRS standards The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) recently met as part of their ongoing effort to make the International Financial Reporting Standards (IFRS)futuristic. They brought out a discussion paper on the qualitative characteristics of decision-useful financial reporting information. `Reliability' came out very strongly as being one of the key characteristics of financial reporting. Given that key companies in the US have gone back to uttering the dreaded word "restatement" this time courtesy an accounting scam involving back-dating of stock options the need for reliability has become all the more necessary. Components of reliability The FASB has its Concepts Statement No 2 to refer to, while the IASB has a framework to understand what the components of reliability are. The Concepts Statement identified representational faithfulness, verifiability, neutrality, completeness and freedom from bias as its components. The IASB framework identified substance over form, neutrality, prudence and completeness as the components. Both Boards concluded that faithful representation the quality of faithfully representing what information purports to represent and neutrality the absence of bias intended to attain a predetermined result or to induce a particular behaviour could be taken to be the key components in exhibiting decision-useful information to users of financial statements. Indian standards Indian accounting standards too place some faith on substance over form as one of the components of reliability of financial statements. Giving an example of an entity disposing of an asset to another party in such a way that the documentation purports to pass legal ownership to that party but agreements could exist that ensure that the entity continues to enjoy future economic benefits embodied in the asset, the discussion paper concludes that if one agrees to the concept of substance over form and reports this as a sale, it would not be faithfully representing the transaction that has been entered into. In what could be a message to the standard-setters in India to move away from the concept of substance over form, the discussion paper concluded that substance over form could not be used as a component to ensure that financial statements are reliable. The discussion paper questioned the need for the term reliability itself. Experience shows that the term has been rather loosely used. The discussion paper found a new buzzword faithful representation which could be used in the place of reliability. The technical definition of the term would mean correspondence or agreement between the accounting measures or descriptions in financial reports and the economic phenomena they purport to represent. Since the goal of financial reporting is to faithfully represent real-world economic phenomena and changes in them, use of the term faithful representation seems appropriate. A good example could be the new concept of "fair value." Representations of fair values should change when the values change. And the changes should reflect the degree of volatility in these changes. The term faithful representation could soon find its way into the accounting standards set by the regulators as well as into the annual reports of companies. Mohan R. Lavi (The author is a Hyderabad-based chartered accountant)
Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Article Management Solutions System Article Management Software S

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions