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15 Cards in this Set
- Front
- Back
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Objectives of Financial Reporting
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To provide information
• useful in making investment and credit decisions • useful in assessing future cash flows |
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Fundamental qualities |
Relevance |
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Relevance |
information is considered relevant if it is capable of making a difference to someone (refers to the usefulness of information).
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Predictive Value
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The ability of information to help predict the
outcome of past, present and future events |
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Confirmatory Value
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Information may be used to confirm or correct prior expectations
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Materiality
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Company-specific aspect of relevance. An item is
considered material if it would make a difference in decision-making. |
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Faithful Representation
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Numbers and descriptions match what really
happened. |
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Completeness
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All information that is necessary for faithful representation is provided.
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Neutrality
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Reliable information is impartial, unbiased; it does not favor one party over another – it serves independent and
opposing parties equally well. |
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Free from Error |
A more accurate (faithful) representation of a financial item. |
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Enhancing Qualities |
Comparability |
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Comparability |
Characteristic which allows similarities and contrasts to be observed over time with respect to an entity or between entities at the same time (i.e., at a given time). Also includes consistency (which occurs when a company applies the same accounting treatment to similar events, from period to period). |
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Verifiability |
Occurs when independent-measurers, using the same methods, obtain similar results. |
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Timeliness |
Having information available to decision-makers before it loses |
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Understandability
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The quality of information that lets reasonably informed
users see its significance. |
