True and Fair View- A Fact or Illusion in the World of Creative AccountingDownload PDF
Financial statements are major source of information and communication about company’s prospects to all the stakeholders. While preparing financial statements, accountants are required to follow certain guidelines provided by Accounting Standards or International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP). A few loopholes in accounting standards provide enough room for Creative Accounting. Creative Accounting leads to window dressing and helps in projecting a very rosy picture of company’s future prospects. In this study, possible situations where Creative Accounting is applied are described. The possible reasons for application of creative accounting might be to show more profits, to get good performance bonus, to pay less tax, to obtain loan from financial institutions, inflating share prices and many more. By applying Creative Accounting techniques, Financial Statements can be changed in such a way that, they will not present ‘True and Fair view’. In today’s world, Chartered Accountants are also called Creative Accountants. Partially this may be true, because a few of them may resort to creative accounting techniques to present the desired results in financial statements; which ordinarily would not be depicting the same picture otherwise.
Keywords: Creative Accounting, True and Fair View, Fraud, Accounting Standards, Financial Reporting