In order for the financial statements to be useful to the stakeholders of a business they must embody certain qualitative characteristics. They are defined as follows:
The fundamental qualitative characteristics
Relevance – financial information is regarded as relevant if it is capable of influencing the decisions of users.
Faithful representation – this means that financial information must be complete, neutral and free from error.
Enhancing qualitative characteristics
Comparability – it should be possible to compare an entity over time and with similar information about other entities.
Verifiability – if information can be verified (e.g. through an audit) this provides assurance to the users that it is both credible and reliable.
Timeliness – information should be provided to users within a timescale suitable for their decision-making purposes.
Understandability – information should be understandable to those that might want to review and use it. This can be facilitated through appropriate classification, characterisation and presentation of information.
The qualitative characteristics of financial information
In order for the financial statements to be useful to the stakeholders of a business they must embody certain qualitative characteristics. They are defined
Course Provider: Organization