Qualitative Characteristics of Financial Statements

Question 1

3 Fundametal Qualitative Characteristics

Answer 1

Fundamental Qualitative Characteristics

Relevance

• Financial info but be relevant and thus, capable of making a difference to the decisions made by users

Materiality

• Info is material if omitting it or misstating it could influence decisions that users make on the basis of financial info about a specific reporting entity

Faithful Representation

• Means info in a financial statement fairly and accurately presents the events that have occurred in a business for a period of time
  
  • Info must be complete, neutral and have no bias

Question 2

4 Enhancing Qualitative Characteristics

Answer 2

Comparability

• Quality that enables users to identify and understand similarities and differences between items in a financial statement

Understandability

• Means that users of financial statements should be able to comprehend the meaning of the info contained in these statements

Verifiability

• Means different, knowledgeable users of a financial statement can agree that the way info is presented in the statement is a faithful representation of that info

Timeliness

• Info is available to decision makers in time to influence their decisions
  
  • Newer the information, the more useful it is