Question

Make a list of the attributes or desirable features (such as the relevance, for example) that must have financial information to make it useful. Explain each of them.

Answer 1

The different attributes that are required for Financial Information are

1. Relevance: Financial information is considered relevant when it adds value to the decision making process by providing the required pieces of information. Through relevant information users can evaluate whether they are moving along the right path or not. Subsequently relevant information can lead the the preparation of right financial statements.

2. Understandability: The financial information should be understandable to the users. If t=the information provided is not understandable, than the purpose of preparation would be non existent.

3. Reliability:

Information is reliable when it is dependable and this is possible if it is:

• free from errors, especially material errors
• complete
• free from bias

Information must be reliable as well as relevant in order to be useful for decision making. Else it would be of no use.

4. Comparability: Comparability of information means the ability to stand useful overtime. Users cannot evaluate different aspects of entity’s financial position and financial performance if they are unable to compare the financial information of one period with another or financial information of one entity with another entity’s financial information. Thus comparability ois an essence.