2.4 Qualitative characteristics of financial information

Question 1

What is meant by “qualitative characteristics” within the IASB Conceptual Framework?

Answer 1

These are characteristics that a business must embody for financial statements to be useful to stakeholders.

Question 2

What are the two types of qualitative characteristics set out in IASB Conceptual Framework?

Answer 2

1 Fundamental qualitative characteristics

2 Enhancing qualitative characteristics.

Question 3

What are the “Fundamental” qualitative characteristics set out in IASB Conceptual Framework?

Answer 3

Relevance

Faithful representation

Question 4

What are the “Enhancing” qualitative characteristics set out in IASB Conceptual Framework?

Answer 4

Comparability
Verifiability
Timeliness
Understandability

Question 5

What is meant by “relevance” within the IASB Conceptual Framework?

Answer 5

Financial information is relevant if it capable of influencing the decisions of users.

Question 6

What is meant by “faithful representation” within the IASB Conceptual Framework?

Answer 6

Financial information must meet three criteria:

• Completeness
• Neutral or unbiased
• Free from error

Question 7

What is meant by “comparability” within the IASB Conceptual Framework?

Answer 7

Accounting methods must be applied consistently for similar situations.

Question 8

What is meant by “verifiability” within the IASB Conceptual Framework?

Answer 8

Accounting information must be verifiable - i.e. verified by an independent accountant.

Question 9

What is meant by “timeliness” within the IASB Conceptual Framework?

Answer 9

Must comply with relevant deadlines (e.g. within 6 months of FYE for UK public entities).

Question 10

What is meant by “understandability” within the IASB Conceptual Framework?

Answer 10

Information should be understandable through appropriate classification, characterisation and presentation.