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A benchmark for the adequacy of published financial statements

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  • David Alexander

Abstract

This paper considers the problem of establishing a criterion against which auditors and others can judge the adequacy of financial reporting. Three types of criteria are considered: a general over-riding requirement (type A), an integrated coherent framework (type B), and detailed regulation (type C). Approaches, trends and arguments are presented from a number of contexts, such as UK, US and Europe. Where more than one type of criterion is present (all three exist in the UK for example) one must be superior to the others. There can only be one deciding benchmark of adequacy. It is argued that type B is inadequate as such a benchmark, as all attempted ‘conceptual’ frameworks are internally inconsistent. Types A and C are both theoretically possible, but it is argued that only Type A is consistent, as the ultimate benchmark of adequacy, with the provision of useful information in a dynamic economic world. The current IASC thinking as demonstrated in IAS1 (revised) (IASC 1977a) is discussed, and contrasted with the fundamentally different proposals in the earlier exposure draft E53 (IASC 1996). The arguments of the paper throw considerable light on this debate, and are consistent with the final content of IAS1 (revised).

Suggested Citation

  • David Alexander, 1999. "A benchmark for the adequacy of published financial statements," Accounting and Business Research, Taylor & Francis Journals, vol. 29(3), pages 239-253.
    • Handle: RePEc:taf:acctbr:v:29:y:1999:i:3:p:239-253
    DOI: 10.1080/00014788.1999.9729584
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    References listed on IDEAS

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    1. K. Van Hulle & K. U. Leuven, 1993. "Truth and untruth about true and fair: a commentary on 'A European true and fair view' comment," European Accounting Review, Taylor & Francis Journals, vol. 2(1), pages 99-104.
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    4. David Alexander, 1996. "Truer and fairer. Uninvited comments on invited comments," European Accounting Review, Taylor & Francis Journals, vol. 5(3), pages 483-493.
    5. David Alexander, 1997. "Stability, pseudo-stability, information and pseudo-information," European Accounting Review, Taylor & Francis Journals, vol. 6(4), pages 755-766.
    6. Stephen Zeff, 1993. "International accounting principles and auditing standards," European Accounting Review, Taylor & Francis Journals, vol. 2(2), pages 403-410.
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    12. K. Van Hulle, 1993. "Harmonization of accounting standards in the EC," European Accounting Review, Taylor & Francis Journals, vol. 2(2), pages 387-396.
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    Cited by:

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    2. Anne Marie Garvey & Laura Parte & Bridget McNally & José Antonio Gonzalo-Angulo, 2021. "True and Fair Override: Accounting Expert Opinions, Explanations from Behavioural Theories, and Discussions for Sustainability Accounting," Sustainability, MDPI, vol. 13(4), pages 1-23, February.
    3. Wally Smieliauskas, 2008. "A Framework for Identifying (and Avoiding) Fraudulent Financial Reporting," Accounting Perspectives, John Wiley & Sons, vol. 7(3), pages 189-226, August.
    4. Gordon, Isabel & Gallery, Natalie, 2012. "Assessing financial reporting comparability across institutional settings: The case of pension accounting," The British Accounting Review, Elsevier, vol. 44(1), pages 11-20.
    5. Stephen Haswell, 2006. "Over-Complexity in Accounting Standards and the Emerging Duopoly of US GAAP AND IFRS," Australian Accounting Review, CPA Australia, vol. 16(39), pages 49-59, July.
    6. Bradbury, Michael E. & Schröder, Laura B., 2012. "The content of accounting standards: Principles versus rules," The British Accounting Review, Elsevier, vol. 44(1), pages 1-10.
    7. David Alexander, 2001. "The over-riding importance of internationalism: a reply to Nobes," Accounting and Business Research, Taylor & Francis Journals, vol. 31(2), pages 145-149.
    8. Alexander, David & Archer, Simon, 2000. "On the Myth of "Anglo-Saxon" Financial Accounting," The International Journal of Accounting, Elsevier, vol. 35(4), pages 539-557, 010.
    9. Nobes, Christopher, 2003. "On the myth of "Anglo-Saxon" financial accounting: a comment," The International Journal of Accounting, Elsevier, vol. 38(1), pages 95-104.

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