L2 Quality of Financial Statements

Question 1

Qualitative Characteristics: Fundamental Qualities - Relevance

Answer 1

Definition: Information that can influence decisions.
Predictive Value: Financial information holds predictive value if it aids users in predicting future outcomes.
Confirmatory Value: Financial information has confirmatory value if it provides feedback on previous evaluations, confirming or changing previous evaluations.

Question 2

Qualitative Characteristics: Faithful Representation

Answer 2

Definition: Financial information must faithfully present the economic events it claims to represent.
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Question 3

Materiality

Answer 3

General Quality that applies across the two fundamental characteristics of relevance and faithful representation.
Definition: Information is material if its omission or misstatement would influence the user’s decision.
Significance: Emphasizes the importance of including information that has a substantial impact on decision-making.

Question 4

Bbu

Answer 4

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