Fair presentation
In one sentenceFinancial statements faithfully representing transactions and events and their effect on financial position and performance, with enough disclosure for the reader to understand the full picture.
Simply put
Statements can have correct figures yet still mislead: a large loss buried in an “other” line, or a significant lawsuit not mentioned. Fair presentation requires the reader to see the true picture.
Applying international standards with appropriate disclosure usually achieves fair presentation, and it is what the external auditor gives an opinion on.
Example
After year end, a company lost a customer that made up a large part of its sales; the figures in the statements do not change, but fair presentation requires disclosing this in the notes so the reader is not taken by surprise.
Don't confuse it with
Fair valueFair value is a way of measuring a specific item, while fair presentation describes the statements as a whole.