Quo vadis European true and fair view? The integration of Continental European and Anglo-Saxon stakeholder protection interests

Abstract

The European Accounting Directive 2013/34/EU stipulates the “true and fair view” as an essential principle of financial accounting. Since the original European implementation of the true and fair view principle, there was a controversial discussion on what exactly a true and fair view means in special cases, as well as how and where to meet this principle. Continental European countries, such as Germany, engaged in a fundamental discussion of the true and fair view as an Anglo-Saxon principle due to its conflict with the principle of prudence. Therefore, this paper outlines the different stakeholder protection interests of the true and fair view principle and the principle of prudence by means of agency theory. Over time this conflicting discussion enriched by the jurisprudence of the European Court of Justice (ECJ), emerging an autonomous European true and fair view principle. The contributions of the ECJ’s case law to a common and conclusive European true and fair view principle will be pointed out. However, it is the paper’s objective to show the development of the European true and fair view principle with its conflicts and the current interpretation of the principle by the new European Accounting Directive. Further, the paper outlines conceptual suggestions on the European true and fair view principle in the interest of predicting how this principle may transform in the future. Hereby the IAS/IFRS-orientation plays a major role in influencing the future development of the true and fair view principle. As a result the paper presents the European solution of solving the conflict between the principle of prudence and the true and fair view principle in respect of both, shareholder and creditor protection interests.