Syllabus B1a)Define, understand and apply qualitative characteristics: Show
i) Relevance The IASB’s Conceptual Framework for Financial ReportingThe IASB’s Conceptual Framework for Financial Reporting describes the basic concepts by which financial statements are prepared. The main purpose of the Framework is to:
Qualitative Characteristics of Financial InformationFor decisions to be made, the information must be relevant to the decision and be clearly presented, stating any assumptions upon which the information is based, so that the user may exercise judgement as appropriate. The revised Framework distinguishes between two types of qualitative characteristics that are necessary to provide useful financial information:
Fundamental Qualitative CharacteristicsFor information to be useful, it must be both relevant and faithfully represented
Enhancing Qualitative CharacteristicsComparability, verifiability, timeliness and understandability are directed to enhance both relevant and faithfully represented financial information. Those characteristics should be maximised both individually and in combination.
However, relevant information should not be excluded solely because it may be too complex and cannot be made easy to understand. To exclude such information would make financial reports incomplete and potentially misleading. Financial reports are prepared for users who have a reasonable knowledge of business and economic activities and who review and analyse the information with diligence. The Cost Constraint on Useful Financial ReportingCost is a pervasive constraint to financial reporting. Reporting such information imposes costs and those costs should be justified by the benefits of reporting that information. The IASB assesses costs and benefits in relation to financial reporting generally, and not solely in relation to individual reporting entities. The IASB will consider whether different sizes of entities and other factors justify different reporting requirements in certain situations. Which of the following qualitative characteristics make financial statement information useful?The fundamental qualitative characteristics that make accounting information useful are relevance and verifiability. Relevant information only has predictive value, confirmatory value, or both.
Which of the following is qualitative characteristics of information in financial statements?The four enhancing qualitative characteristics are comparability, verifiability, timeliness and understandability.
What are the qualitative characteristics that make accounting information useful?Qualitative characteristics of accounting information that impact how useful the information is:. Verifiability.. Timeliness.. Understandability.. Comparability.. Which of the following is true of the qualitative characteristic of understandability in relation to information in financial statements?Which ONE of the following is true of the qualitative characteristic of 'understandability' in relation to information in financial statements? "it is assumed that users have a REASONABLE KNOWLEDGE of business and accounting and a willingness to study with REASONABLE DILIGENCE the information provided."
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