Should Financial Statements Represent Fairly or be Relevant? Considering the IASC/IASB Conceptual Framework

Author:Professor Alain BURLAUD, Ph. D.

JEL:M 41, M 48

DOI:

Keywords:conceptual framework, IFRS, true and fair view, fair presentation, reliability, relevance

Abstract:
To ask if financial statements should “represent fairly” or be “relevant” gives a political dimension to the tradeoff between reliability and relevance, two characteristics that the IASC/IASB Conceptual Framework does not consider as conflicting. However, depending on the priority we give to these characteristics, the accounting system differs widely. Some concepts from the behavioral sciences help to better understand the underlying implicit and explicit hypothesis of IFRS’s Conceptual Framework and to have a more critical perspective. The answer to the question of the choice between “fair representation” and “relevance” cannot be purely technical due to the fact that the produced information shapes the reality as well as it describes it. Therefore, the standards setter has a political responsibility.\r\n

---