Objectives and Qualitative Characteristics

Question 1

Primary Characteristics

Answer 1

Faithful Representation and Relevance

Question 2

Faithful Representation- can i depend on it?

Answer 2

1) completeness
- are all facts embedded in the information
2) neutrality
- no bias, objectivity & balance
3) free from error
- would a 3rd party receive the same result?

Question 3

Relevance-does it relate to my decision?

Answer 3

1) predictive value
- can i predict something about the future?
2) confirmatory value
- provides info about earlier expectations; explains how past actions have affected current financial position
3) materiality
- influence decision

Question 4

Enhancing Characteristics

Answer 4

• between companies (comparable)

- not uniformity

Question 5

Verifiability

Answer 5

independent observers would reach similar conclusions

Question 6

Timeliness

Answer 6

-recent enough to make a difference

Question 7

Understandability

Answer 7

comprehensible by a user with reasonable understanding of business