Accounting Concepts and Principles

2 FUNDAMENTAL qualities of useful financial information

• Relevance

• Comparability

• Verifiability

• Faithful Representation

something is ____ if it is capable of making a difference in a decision

• timely

• comparable

• relevant

• understandable

Attributes of relevance

• Completeness

• Neutrality

• Confirmatory value

• Predictive value

An attribute of relevance whereby a material information helps the user verify fulfilment or non-fulfilment of prior expectation or decision

• Confirmatory value

• Predictive value

• Comparable value

• Neutral value

An attribute of relevance whereby a material information helps the user make predictions or forecasts about the meaning and ultimate outcome of the events giving rise to the information.

• Predictive value

• Confirmatory value

• Comparable value

• Neutral value

Check all applicable: Information is faithfully represented if it contains

• completeness

• neutrality

• freedom from error

• verifiabiity

The information includes everything necessary to reflect what happened for all of the business activities for which the firm is reporting.

• completeness

• neutrality

• freedom from error

• verifiability

The information is ______ if the financial statements are objectively prepared and free from bias (not favoring a particular group over the others).

• complete

• free from error

• neutral

The information is _____ if it is the best available data that a firm can possibly present. But it does not mean perfect due to inherent uncertainties, estimates and assumptions involved in generating the information.

• complete

• free from error

• neutral

Comparability, timeliness. verifiability, and understandability are

• fundamental characteristics

• enhancing characteristics

• modifying principles

• accounting assumptions