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The International Accounting Standards Committee’s Framework for the Preparation of Financial Statements identifies four primary qualitative...

The International Accounting Standards Committee’s Framework for the Preparation of Financial Statements identifies four primary qualitative characteristics.

a. Discuss the four qualitative characteristics identified by the IASB.

b. Contrast and compare these qualitative characteristics with the qualitative characteristics identified by the FASB in SFAC No. 8.

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Expert Solution

       The four qualitative characteristics identified by the IASB             

  1. Understandability : User should understand the financial statement. Entity can present information in such a manner that it helps in understanding. Also with proper explanation financial statements can be made more understandable.
  2. Relevance : Information of financial statement should be relevant for decision making. Through relevant information users can evaluate whether they are moving along the right path
  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.
  4. Comparability : Comparability of information refers to its ability to stand useful overtime and against the financial information from other sources.

Qualitative characteristics identified by the FASB in SFAC No. 8.

  • Relevance : Relevant financial information is capable of making a difference in the
    decisions made by users.
  • Materiality: Information is material if omitting it or misstating it could influence decisions that users make on the basis of the financial information of a specific reporting entity.
  • Faithful Representation : It would be complete, neutral, and free from error.
  • Comparability : Users’ decisions involve choosing between alternatives
  • Verifiability : Verifiability helps assure users that information faithfully represents the economic process it purports to represent.
  • Timeliness : Timeliness means having information available to decision makers in time to be capable of influencing their decisions.

ekkarill92 answered 1 year ago
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