Qualitative Characteristics of Financial Information

Financial information presented in financial statements needs to have some key qualities which make it useful for the users. Generally accepted accounting standards normally outline such standards in their frameworks. IASB Conceptual Framework categorizes these into fundamental qualitative characteristics and enhancing qualitative characteristics. These include

Relevance requires financial information to be relevant to the decision making needs of the users.

Materiality requires accountants and auditors to focus on financial information which is expected to affect the decisions of the users.

Faithful representation requires the financial information to be true and fair and free from misstatement.

Comparability requires the financial information to be comparable across periods and across companies.

Verifiability requires the information to communicate the underlying economics of the company's business.

Timeliness requires disclosure of financial information not to be excessively delayed.

Understandability requires the financial information to be understandable by users with reasonable knowledge of business and economic activities.

by Obaidullah Jan, ACA, CFA and last modified on

Related Topics

XPLAIND.com is a free educational website; of students, by students, and for students. You are welcome to learn a range of topics from accounting, economics, finance and more. We hope you like the work that has been done, and if you have any suggestions, your feedback is highly valuable. Let's connect!

Copyright © 2010-2019 XPLAIND.com