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Taxation is the one of the domain ton which business firms give due importance in their business. In the current report detail discussion is carried out on the true and fair concept of the accounting and in this regard the reason due to which it is prepared is discussed in detail in the report. Along with this, mentioned concept in respect to Australia is discussed in the report. In the report, extent to which Australia regulatory system support financial reporting is also discussed in detail. At end of the report, conclusion section is prepared.
True and fair view of the accounting records is the one of the main accounting concept that was developed in the UK in 1844. As per this concept it was mandatory for the business firms to prepare accounting records in the systematic way. By doing so it was ensured that accounting statements were prepared in the systematic way and are reflecting true financial position of the business firm. Fair view of the accounting records reflects the actual condition of the business firm.
Earlier, it happened that business firms were not reflecting their actual condition and business performance. Due to this reason stakeholders that have business interest in the firm does not get true financial position overview of the business firm (Kaplan and Atkinson, 2015). It was created in the UK in the 1844 under the UK joint stock companies act of 1844 under which there was requirement for the business firms to ensure that full and fair balance sheet is presented in the ordinary meeting of shareholders.
In the Australia true and fair concept was introduced in the Victorian company’s act 1955 and it was the first act that follow 1947 UK amendment. There are number of historical purpose of the True and fair view concept. There were number of reasons due to which true and fair concept was bring in the nation. In the partnership business it was observed that there is a mutual friendship relationship among the partners. All of them have equal right to participate in the decision making process of the business firm. It is usually observed that among all partners some have high level of knowledge and some have little knowledge of the business.
Due to this reason specific partner have dominance over other and influence other dictions. Such kind of influential partners in order to protect their own interests usually prepare or modify financial statements of the business firm. By preparing true and fair concept main aim was to ensure that accountability of all partners will be secured in the systematic way in the business. There will be trust and goodwill in the business which will have positive impact on the business firm. It can be said that true and fair view concept or law ensure that business firms will not be able to cheat others and in the company or partnership business there will be no one that will use business or operate business to secure its own interests (Kieso, Weygandt and Warfield, 2010).
There is a famous case of the Mine Adventures of England which in the eightieth century was running in heavy debt. There was a law of act of relief of the creditors and proprietors under which there was a law that makes it mandatory to senior officers like governor, deputy governor and Directors to make actually a true state of the firm financial condition. Under this law there were Directors that were authorized to appoint any accountant that was honest and can bring any discrepancy in the books of accounts in the light of the Director.
Such kind of thing will ensure that creditors have full satisfaction of state of the business firm. All these things clearly reflects that main aim of bringing trueand fair position concept was to ensure that all stakeholders that have interest in the firm remain informed about its true state and will be able to take right decision to take prudent decisions. By doing so it is ensured that interest of the stakeholders is protected and single person cannot negatively affect interest of all stakeholders of the project. It can be said that there is high importance of the true and fair concept for the business firms (Gow, Ormazabal and Taylor, 2010).
With passage of time many new things are bring or introduced in the Australia to ensure that firms will present true and fair information on the financial statements. There are strict rules and regulations that makes it mandatory for the business firms to prepare financial statements accurately. In case any firm violate relevant rules and regulations then in that case strict action can be taken against the business firm by the regulatory authority. It can be said that there is a huge importance of the true and fair concept for the busi
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