Module 2: Qualitative Characteristics of Financial Statements

Question 1

What are the basic qualitative characteristics?

Answer 1

URRC

1. Understandability: readily understandable to users of the FS
2. Relevance: relevant to needs of the users to help influence their decisions
3. Reliability: apply proper disclosure, free from material error, bias, or misleading information
4. Comparability: easily comparable to other financial statements presented in other periods to identify financial performance trends of the reporting entity

Question 2

What are the enhancing qualitative characteristics?

Answer 2

VCUT

1. Verifiability: accounting information provided in FS must be verifiable by independent accountants
2. Comparability: standardized FS means it can be compared to FS of other business organizations
3. Understandability: financial information should be presented Clearly, Concisely, and Orderly to be easily comprehensible/ knowledgeable (CCOKE).
4. Timeliness - how quickly information is available to users of accounting information. (Monthly, Quarterly, Semi-Annually, and Annually)