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15 Cards in this Set
- Front
- Back
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What are the two qualitative characteristics of accounting information? |
1. Relevance 2. Faithful representation |
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Components of relevance? |
1. Predictive value 2. Confirmatory value 3. Materiality |
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Components of faithful representation? |
1. Completeness 2. Neutrality 3. Free from error |
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Enhancing qualities? |
1. Comparability 2. Verifiability 3. Timeliness 4. Understandability |
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What is the basic objective of financial reporting? |
Information must be "useful to present and potential equity investors, lenders, and other creditors in making decisions about providing resources to the entity." |
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What is relevance? |
Capable in making a difference in a decision. |
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What is predictive value? |
Information that has value as an input to predictive processes. |
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What is confirmatory value? |
Helps users confirm or correct prior expectations. |
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What is materiality? |
If the information is omitted or misstated, then it could influence the decisions that users make on the basis of the reported financial information. |
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What is completeness? |
Provides all information necessary. |
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What is neutrality? |
Not biased towards a predetermined result? |
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What is comparability? |
Identify real similarities and differences in economic events between companies. Includes consistency---which means that a company must apply the same accounting treatment from period to period. |
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What is timeliness? |
Information is available to decision makers before it loses its capacity to make decisions. |
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What is verifiability? |
When independents measures use the same methods to obtain similar results. |
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What is understandibility |
For information to be useful, informations must be classified, characterized, and presented clearly and concisely. |
