accounting information must be relevant and also faithful representation a) how can this supposedly turn out...

accounting information must be relevant and also faithful representation
a) how can this supposedly turn out to be a balancing act(juggling both relevance ans faithful representation)
b) give an example of an accounting concept where relevance exists but lacks faithful representation

Solutions

Expert Solution

(a) Relevance is one of the decision-specific characteristics of useful accounting information. Relevant information is capable of making a difference in a decision. Information with no bearing on a decision is irrelevant and the information should also be timely in order to be considered relevant.

Faithful representation means that the numbers and descriptions match what really existed or happened. To be a faithful representation, information must be complete, neutral, and free of material error. It is basically the concept that financial statements produced must accurately reflect the condition of a business.

According to conceptual framework , information is said to be useful when it is relevant and represents faithfully what it purports to represent. The usefulness is enhanced if it is comparable, verifiable, timely and understable.

(b) The given example perfectly suits the relevant characteristics but it lacks faithfull representation :

Forecasts of future operating results and projections of future cash flows may be highly relevant to some decision makers. However, they would not be as free from error as historical cost information about past transactions which shows the information is relevant for the decision taking but it is not faithfull as it is not free from errors and we can't be sure about the future forecasts.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

According to the conceptual framework, accounting information must be relevant and also representationally faithful. A) How...

According to the conceptual framework, accounting information must be relevant and also representationally faithful. A) How can this supposedly turn out to be a balancing act (i.e. trying to juggle both relevance and representational faithfulness? B) Give an example of an accounting concept where relevance exists but lacks representational faithfulness or vice versa.

Illustrate with an example how faithful representation concept/assumption may be applied to accounting for inventory.

1. Does information in a sustainability report meet the qualities of Relevance and Faithful Representation as...

1. Does information in a sustainability report meet the qualities of Relevance and Faithful Representation as identified in the Conceptual Framework?

1.According to GAAP, to be useful, accounting information must be all of the following EXCEPT: Relevant...

1.According to GAAP, to be useful, accounting information must be all of the following EXCEPT: Relevant Reliable Subjective Comparable 2. An increase in the cost of goods sold would cause a company’s profit margin to a. increase. b. decrease. c. remain unchanged. d. Must be offset by an increase in the selling price. 3. Which of the following is not an element of internal control? Assigning responsibilities to individuals who have the authority to administer them...

Case Questions/Information: The responses to the case questions must be typed. You must turn a printed...

Case Questions/Information: The responses to the case questions must be typed. You must turn a printed copy by the beginning of class on the day that the case is due. You may work alone or in a group of up to 4 students. Only 1 copy of the case is required for any groups, but please be sure that all students’ names are included on that copy. You should use an Excel spreadsheet to show your calculations. Any text responses...

Discuss why the historical-cost accounting model may not provide decision-relevant information in an inflationary environment. MUST...

Discuss why the historical-cost accounting model may not provide decision-relevant information in an inflationary environment. MUST BE ORIGINAL WRITING!!

Do the following using R. You must also turn in a copy of your R code....

Do the following using R. You must also turn in a copy of your R code. (10) What is the probability a beta (1, 8) random variable is less than 0.13? (11) What is the probability a beta (3, 9) random variable is greater than .4? (12) What is the probability a beta (18,4.4) random variable is between 0.6 and 0.7? (13) At what value of x is the probability that a beta (4, 7) random varable is less than...

‘If financial information is to be useful, it must be relevant and faithfully represent what it...

‘If financial information is to be useful, it must be relevant and faithfully represent what it purports to represent. The usefulness of financial information is enhanced if it is comparable, verifiable, timely and understandable’ (IASB Conceptual Framework for Financial Reporting 2010). Required: (a) Identify and explain the fundamental and enhancing characteristics of financial information, as defined by the IASB. (b) Critically evaluate the use of a conceptual framework as a frame of reference for the regulation of financial reporting. Your...

If financial information is to be useful, it must be relevant and faithfully represent what it...

If financial information is to be useful, it must be relevant and faithfully represent what it purports to represent. The usefulness of financial information is enhanced if it is comparable, verifiable, timely and understandable’ (IASB Conceptual Framework for Financial Reporting 2010). Required: (a) Identify and explain the fundamental and enhancing characteristics of financial information, as defined by the IASB. (b) Critically evaluate the use of a conceptual framework as a frame of reference for the regulation of financial reporting.

A key understanding of how synapses work is that they must be able to 1. Turn...

A key understanding of how synapses work is that they must be able to 1. Turn a signal on, 2. Turn a signal off again. Explain why two neurons, one dopaminergic, one glutergic demonstrate this principle in Cocaine addition. In Nicotine addiction, the pathway is reversed, a Cholinergic neuron is followed by a Dopaminergic neuron. The same logic applies. Explain. I am an addict. Which is my best excuse? 'It’s my genes'. 'It’s my mates'. 'It’s down-regulation of my receptors'....

Subjects