Why do the boards propose to change the existing notion of reliability to the new notion of faithful representation?
In considering reliability, the boards observed that there are a variety of views of what the notion means. For example, some focus on verifiability or free from material error to the virtual exclusion of the faithful representation aspect of reliability. And to some, reliability apparently refers primarily to precision. Those considerations led the boards to consider how they could convey better what reliability means. Accordingly, the boards propose that faithful representation encompasses all of the qualities that the previous frameworks included as aspects of reliability. Faithful representation—the depiction in financial reports of the economic phenomena they purport to represent—is essential if information is to be decision useful. To represent real world economic phenomena faithfully, accounting representations must be complete, neutral and free from error.
Related Questions
- Why do the boards propose to change the existing notion of reliability to the new notion of faithful representation?
- What happens when a member’s company expands to a new location where there is no existing IPN representation?
- Why is verifiability not a component of the proposed notion of faithful representation?
