The Concept of Probabilities in IFRS

The concept of probability is used in the recognition criteria of International Financial Reporting Standards (IFRS) to determine how to classify  a transaction. The classification of a transaction is determined after considering all the facts and circumstances surrounding the transaction. In South Africa, the civil standard of proof is proof on a balance of probabilities. For example, having an opinion on a certain issue, is proven on a balance of probabilities, which means that it is more likely than not to that one’s opinion is “true and fair”. It means that it is probable, i.e., the probability that one’s opinion is “true and fair” is more than 50%. So mathematically, proof on a balance of probabilities is a 50.1% likelihood of one’s opinion being “true and fair”. This means that if my opinion on the accounting for the “Westbank Transaction is to be considered “true and fair” there must be a greater than 50% chance that after considering all the facts and circumstances I am more than likely correct. I submit that any reader of this opinion will consider my opinion to be “true and fair” after considering all the facts and circumstances and weighing up all the available evidence.