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: Qualitative characteristics of useful financial information
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[QUOTE="Yakub02, post: 303945, member: 94426"] Qualitative characteristics of useful financial information . Information must have certain characteristics in order for it to be useful for decision making. The IASB Conceptual Framework describes: fundamental qualitative characteristics; and enhancing qualitative characteristics. Fundamental qualitative characteristics: relevance; and faithful representation The qualitative characteristics that enhance the usefulness of information that is relevant and a faithful representation are: comparability; verifiability; timeliness; and understandability. Relevance Information must be relevant to the decision-making needs of users. Information is relevant if it can be used for predictive and/or confirmatory purposes. It has predictive value if it helps users to predict what might happen in the future. It has confirmatory value if it helps users to confirm the assessments and predictions they have made in the past. The relevance of information is affected by its materiality. Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions of the primary users based on financial statements. Materiality is an entity-specific aspect of relevance based on the nature or magnitude (or both) of the items to which the information relates in the context of an individual entity’s financial report. Therefore, it is not possible for the IASB to specify a uniform quantitative threshold for materiality or predetermine what could be material in a particular situation. Faithful representation Financial reports represent economic phenomena (economic resources, claims against the reporting entity and the effects of transactions and other events and conditions that change those resources and claims) by depicting them in words and numbers. To be useful, financial information must not only represent relevant phenomenon [/QUOTE]
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