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Dear Mike,
I read the book of KAPLAN which states that :
Pervasive:
• Are not confined to specific elements, accounts or items of the financial
statements.
• If so confined, represent or could represent a substantial proportion of
the financial statements, or
• In relation to disclosures, are fundamental to users’ understanding of the
financial statements.I read the above points still not cleared. Kindly give me at least 2 to 3 examples (if possible from exam papers point of view) or any practical example.
Thank you.
“• Are not confined to specific elements, accounts or items of the financial
statements.”Subsidiary not consolidated
“• If so confined, represent or could represent a substantial proportion of
the financial statements”Tangible non-current assets – by far the largest figure on the statement of financial position – are not being depreciated
“• In relation to disclosures, are fundamental to users’ understanding of the
financial statements”Some matter has been disclosed, as required, but the wording of the disclosure is such that it could materially mislead the reader of the financial statements and distort the view of those statements
“When I was much younger, I used to drink 6 pints of lager every evening. Now, I’m pleased to say, I don’t drink any more”
So how do you interpret that? Do you interpret that statement as meaning that I no longer drink alcohol?
That’s not what I’ve said … what I HAVE said is that I don’t drink more than 6 pints of lager in the evening
The statements could validly be interpreted in either of the two ways indicated. In a similar situation, the directors could disclose something within the notes to the financial statements that is perfectly true but which is likely to be interpreted in a way that gives the impression rather different than reality
Is that ok?
PS I really don’t drink any more
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