Qualitative Characteristics

Question 1

What are the 2 fundamental qualitative characteristics?

Answer 1

• Relevance
• Faithful representation

Question 2

What are the 4 enhancing qualitative characteristics?

Answer 2

• Comparability
• Verifiability
• Timeliness
• Understandability

Question 3

define Relevance

Answer 3

Relevant financial information is capable of making a difference in the decisions made by users, ie if it has
- predictive value and/or
- confirmatory value

Question 4

define Failthful Representation

Answer 4

To be useful, financial information must faithfully represent the phenomenon it purports to represent.

A perfect faithful representation would be:
- Complete
- Neutral, and
- Free from error

Question 5

define Comparability

Answer 5

Information is more useful if it can be compared with similar information about:
- other entities, and
- other periods
Consistency helps achieve comparability

Question 6

define Verifiability

Answer 6

Assures users that information faithfully represents the economic phenomenon it purports to represent.
Verification can be direct or indirect.

Question 7

define Timeliness

Answer 7

Having information available to decision makers in time to be capable of influencing their decisions.

Question 8

define Understandability

Answer 8

Classifying, characterising and presenting information clearly and concisely.