The requirement that all financial statements which are prepared
for the purpose of compliance with the Companies Acts should give a
‘true and fair view’ was first introduced in the
Companies Act 1947, which amended the former phrase ‘true and
correct’.
The concept of ‘true and fair view’ was adopted
for the whole of the European Community by the EC Council in its
Fourth Directive, which laid down the form and content of company
accounts. This was implemented in the UK by the Companies Act 1981,
subsequently consolidated in the Companies Act 1985. Further
changes were made by the Seventh Directive, which was implemented
by the Companies Act 1989. The provisions are now in Schedules 4
and 4A to the 1985 Act, with the requirement for ‘true and
fair view’ in Section 226 (227 for groups).
The Companies Act 1989 gave the first UK statutory recognition
to the existence of accounting standards. It inserted a new Section
256 in the Companies Act 1985, and a new disclosure requirement in
Schedule 4 to that Act. ‘Accounting standards’ are
defined as statements of standard accounting practice issued by
prescribed bodies; accounting standards applicable to a
company’s accounts are those which are relevant to a
company’s circumstances and to the accounts. Schedule 4,
paragraph 36A, requires companies to state by way of note whether
the accounts have been prepared in accordance with applicable
standards and particulars of and reasons for any material
departures. (There is an exception for small and medium sized
companies and certain small and medium sized groups).
The Accounting Standards Board is the prescribed standard
setting body for the purposes of Section 256.
