Objectives, Qualitative Characteristics Flashcards
What is Understandability?
Information is understandable if the user comprehends it with reasonable effort and diligence.
What is Timeliness?
To be relevant, accounting information must be received in time to make a difference to the decision maker.
What is Verifiability?
Information is verifiable if different knowledgeable and independent observers can reach similar conclusions.
What does it mean to be free from material error?
Information is free from material error if it is accurate and truthful.
What are the Primary Qualitative Characteristics of Financial Information?
Relevance, Faithful representation.
What is Neutrality?
To be neutral, accounting information must be free of bias.
What is Confirmatory Value?
To be relevant, accounting information should assist decision makers in confirming past predictions.
What is Timeliness?
To be relevant, accounting information must be received in time to make a difference to the decision maker.
What are the ingredients of Faithful representation?
Completeness, Free from material error, Neutrality.
What is Predictive Value?
To be relevant, accounting information should assist financial statement users in making predictions about future events.
What are Objectives of Financial Reporting?
To provide information about the entity to current and future users of the financial statements who are making credit and investment decisions.
What is completeness?
Information is complete if it includes all data necessary to be faithfully representative.
What does it mean to be free from material error?
Information is free from material error if it is accurate and truthful.
What is Understandability?
Information is understandable if the user comprehends it with reasonable effort and diligence.
Who is the Target Audience of Financial Statements?
Decision makers; mainly potential investors, creditors, and regulators.
