True and Fair View - A study of the implications of this concept within IAS and Swedish GAAP

Abstract

Background and problem: The accounting is becoming more harmonised. In June 2002 was it decided that all listed companies, insurance companies and banks have to implement a common accounting system throughout the European Union (EU). This will ease the comparison of the financial statements between companies in different countries and branches. Consequently will the investor’s decision-making be facilitated. Even though, all concerned parties have known about the implementation for some time, some problems concerning the timeframe will appear. Another problem is that the actual date for the implantation is 1st January 2004 as a one-year comparison statement is needed. As IASB still is reviewing and changing existing standards will the users have problems knowing what standards to apply. There are also some standards that still not have been put into force. Aim of study: To elucidate what accounting system, IAS or Swedish GAAP, that gives the most true and fair view of the companies financial statements. The accounting systems view on the concept true and fair will also be investigated. Delimitations: The study is only focusing on the Swedish market and is not concentrating on any specific branches. Methodology: Interviews with four IAS-experts at the four major auditing firms in Sweden have been carried out. These interviews have been a support and complementary information for the literature, journals and Internet sites that have been covered in the literature review. The empirical findings have then been analysed in relation to the literature review. Results and conclusion: We have reached a conclusion that the interpretation of true and fair view is very individual. Hence, is it rather difficult to say which system that gives the most true and fair view. As Sweden accepts IAS as a new accounting system it could be argued that it is not poorer that Swedish GAAP. It will also become easier to compare Swedish companies with other companies within the EU. This is seen to contribute that more investors will look at the financial market in EU. In a couple of years would we probably have reached another result as IAS then already would have been implemented. Further studies: A study could also be carried out after the implementation has taken place. At this time interviews could be made with both auditors’ and companies’ in order to reach an understanding of what system that has the most true and fair. It would also be interesting to elucidate whether IAS would be suitable for small and medium size enterprises (SME’s) as well.