Financial reportingThe primary objective of financial reporting is to provide useful information for making business decisions. Show
Useful accounting information should possess two fundamental qualitative characteristics:
Additionally, there are enhancing qualities.
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The qualitative characteristics of financial informationIn order for the financial statements to be useful to the stakeholders of a business they must embody certain qualitative characteristics. They are defined as follows: The fundamental qualitative characteristics:Relevance – financial information is regarded as relevant if it is capable of influencing the decisions of users.Faithful representation – this means that financial information must be complete, neutral and free from error. The enhancing qualitative characteristics:Comparability – it should be possible to compare an entity over time and with similar information about other entities. Verifiability – if information can be verified (e.g. through an audit) this provides assurance to the users that it is both credible and reliable. Timeliness – information should be provided to users within a timescale suitable for their decision making purposes. Understandability – information should be understandable to those that might want to review and use it. This can be facilitated through appropriate classification, characterisation and presentation of information.
What are the qualitative characteristics of useful financial information?According to the framework, qualitative characteristics are the attributes that meet the decision usefulness of financial information. The framework listed these attributes as; relevance, faithful representation, comparability, understandability, verifiability and timeliness.
What are the qualitative characteristics to be adopted for the preparation of financial statements?Qualitative characteristics of financial statements. Understandability. The information must be readily understandable to users of the financial statements. ... . Relevance. ... . Reliability. ... . Comparability.. How can enhancing qualitative characters are able to enhance usefulness of financial information?Enhancing qualitative characteristics
If financial information is to be useful then it must be relevant and must also faithfully represent what is being reported. The usefulness of this information is enhanced if it is comparable, verifiable, timely and understandable.
What are the quantitative characteristics of financial statements?Terms in this set (10). Relevance. If it is capable of making a difference in the decisions made by users.. Faithful Representation. Must represent the economic phenomena that it purports to represent. ... . Materiality. ... . Complete. ... . Neutral. ... . Free From Error. ... . Prudence. ... . Reliability.. |