Statement 106, paragraph 3, says that if the auditors consider that a departure from normal accounting practices is not justified, and the true and fair view shown by the accounts is thereby impaired, they true should, in addition to referring to the Notes and disclosing the necessary information in their report, express a qualified opinion and quantify the financial effect of the departure, unless this is- impracticable.
And if it is considered impracticable to give this quantification, the reasons should be stated.
This appears to indicate that if a company director of, say, China Light and Power Company Ltd, considers Statement 123 is unrealistic and refuses to accept or adopt Depreciation Accounting as specified in paragraphs 16, 19 and 25 of the Statement, then he must expect the auditors to state that this departure from the standard accounting practice is not justified.
The question is: What does constitute a true and fair view of a company's assets located in the New Territories within the context of the historical Accounting Convention and, also, of a company's asset located on the border of the New Territories with Kowloon ?
The recommendations of the Hongkong Society of Accountants contained in Statements 106 and 123 are intended to introduce a definitive approach to the concept of what constitutes a true and fair view, but in view of the political situation in Hongkong in regard to land and buildings are these statements, in fact, realistic ?
The policy of many companies in Hongkong on Depreciation Accounting is to :
1) Depreciate neither land nor buildings ; ( 2 ) Depreciate both land and buildings;
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