The Credibility of Accounting Information From the Point of View of
The Substance Over Form
Lefu Rye Library University ,Arad
【】abstractAccounting information, only to have credibility to the user can help. Accounting information only when there is no significant mistake and have sex only credible unbiased. Accounting information must have the following factors have credibility: true expression sex, unbiased sex, prudence, integrity, and conform to the laws of economic and practical. To ensure that the accounting information credible, accounting transactions to not only the form of legal and consistent, the more important and economic entity consistent.
:Keywords understandability, relevance, credibility, and the true image
Accounting information to help users of accounting information must have certain conditions. International GAAP to confirm the measurement of accounting information must have: understandability, relevance, credibility and comparability.
Understandability , accounting information must be able to easily and clearly understood by the users of accounting information. The diversity of users of accounting information determines the accounting report must provide a clear accounting information to help users make economic decisions. So, on the one hand, accounting knowledge and understanding of the user's ability to be compatible, on the other hand, although the accounting information can not be ruled out in the economic situation, but some users of accounting information can not understand the information, they were considered to be closely related.
Relevance,is to reflect the financial position of the accounting information to help users understand the past and present transactions, and use these as a foundation for future economic conditions is expected to confirm or modify the present evaluation to influence the user's decision-making. Relevant accounting information must meet the following
conditions: predictable, traceable value and importance
Predictability, accounting information must be able to fully be used to predict the future for financial information. The efficiency of this prediction depends on the quality of the information of past transactions and events. Future information can be determined and uncertain, from this point of view, we can consider a prediction that the future of the enterprise is determined, can also do a variety of estimates, because the future of the business there are several possible trends. The clarity of this forecast is based on past information to consider, through the historical data to establish the model to reflect the development process and trends.
The relevance of information by the type and substantial impact. In most cases, the kind of information that determines the relevance of information, some time, and the substance of the information and the importance of the combined effect. If the omission or misstatement of accounting information, it may affect the users' economic decision-making.
Substantive is the starting point of the importance of accounting information, it depends on the size of the misstatement or elements of it, this specific misstatements and omissions in order to judge the importance of the starting point must have a quantitative standard rather than a qualitativestandards, to make accounting useful, it must be substantive.
The comparability of accounting. If the financial situation in space and time than the accounting information must be comparable. In order to make accounting information line, the accounting department should ensure that the accounting recognition, measurement and reporting method is unchanged. If the method is changed, the user will have to find data resources to distinguish the difference of the different accounting methods. Comparability requirements can not become an obstacle to improve accounting quality standards, otherwise, the accounting information is the lack of homogeneity. Credibility. The credibility of accounting information without significant error, unbiased, and users believe that the response of the accounting information is true. Credibility depends on the following factors: accounting reports must be true, neutral and impartial, careful and complete in accordance with the law, and affordable.
Neutral bias, the accounting information is not distorted to reflect the decision-making does not affect the expected direction.
Prudence, including preventive measures, including the assessment of uncertainty, such as assets and income should not be overestimated, liabilities and expenses can not be underestimated.
Accounting integrity of the assumptions in the case of reasonable importance of access to accounting information at a reasonable cost, financial condition information is complete. There may be missing, perhaps false information may mislead users of economic decision-making omissions.
If the information is unbiased, prudence, and integrity to meet the authenticity and legal and affordable in the transactions are met, to accept or reject in accordance with the law and economic applicability will lead to different results.
The real situation, as the basic objectives of the European accounting requirements, its concept was first originated in Great Britain, originally the laws of the British Business Association in 1974 using the text form of notices. Subsequently, it was for reference and is defined in the views of the European Economic Association, Fourth instructions. The real nature of this concept refers to the two professional accounting schools, a dispute between the European mainland schools and Anglo-Saxon school, but to create similar laws, there are still significant obstacles. The international accounting reference did not directly define the concept of real content. Information related to this more general characteristics, such as: the information presented in the balance sheet must truly represent the transactions and other matters to be presented, or accounting the use of standards and quality standards will be the establishment of universal reflect true and fair financial position.
Authenticity as an accounting, it is difficult to define, it led to a variety of explanations, these explanations in the two most relevant are: the Anglo-Saxon and Continental Europe schools.
Anglo-Saxons, the authenticity of the definition of the concept is popular in the economy rather than legal. Their point of view means that the transactions and events reflect the economic substance true.
The economic substance of transactions and events are not always consistent with its legal form. However, the legal form and economic substance of the majority of transactions is the same, because the formulation of the contract is used to reflect the economic impact of the transaction. However, in some cases, the real business impact is not reflected in the terms of the transaction the legal form of reliable. Therefore, in order to reflect the information in these cases, the real economic substance should be more important than the legal form of the substance over form.
Anglo-Saxon accounting literature, the authenticity of the concept is well expressed in "truth and fairness". Which an accounting authenticity of view is presented in M. Rees Thailand and Asia and CG Dumitru Rutter's thesis - "Advanced Accounting".
The author of the study show that the truth in the authenticity of significance reflects the financial status of the obligation is to provide a true and correct information as well as organizational results. Reflect the truth of the definition of accounting truth is like a mirror, like to provide us with information.
Anglo-Saxon definition of producers and users of the authenticity of the accounting information have been looking for a way to respect the accounting standards, application of the constructive truth in this area, the view of the European continent is to establish rules and honestreflectivity of the truth.
In continental Europe accounting point of view of economic substance over legal form is not mandatory defined to authenticity. In the form of an accounting subject to legal constraints, authenticity, as a goal of financial accounting, such as law and honest terms before being defined.
The rule refers to respect for the current accounting rules and procedures. Assess more respect for these rules, legal documents, will come earlier application. Application of accounting standards may be and the veracity of conflict. For example, look at the example:
(1)Evaluation rules, there is a conflict with the generally accepted principles and those imposed by the Finance Act. In these cases, when the Finance Act does not require accounting registration, this problem can be accepted through the registration and its consistent accounting rules. Fiscal rules require the registration of financial assessment,
this problem can be resolved by creating a special account to.
(2) There is a situation, how to do accounting standards provide organizations with several accounting policies. In this case, the policy options and other accounting principles consistent with, and ultimately reflect its authenticity.
(3) The last case is the application of accounting standards will lead to an inaccurate judgment of economic authenticity. That case, in order to accurately reflect the accounting business, we must be honest economic substance is more important than the legal form. Therefore, we can conclude that, to ensure authenticity, the people to remember and use of the substance over form principle, to comply with the application of legal norms will lead to inaccurate information.
Honesty is the Certified Public Accountants Code of Conduct professional and impartial application of accounting standards and regulations. Applied in practice honesty will help us to improve the quality.
Based on the above discussion, we can draw the following conclusions: in order to provide accurate information, it must be ready for the emphasis on rights and obligations of the financial position of transactions and events reflect the transactions and events generated in the transactions and events when the real economic.