Question

Conceptual Framework

The qualitative characteristics of useful financial information

(this is the complete question)

Determine if each of the following items contains information that is relevant and explain why. If you determine that the item is irrelevant, explain your reasoning.

1.The brand of machinery used in the manufacturing process

2.Net Income

3.The schedule of future payments for operating leases

4.The average salary of employees for each department within the firm.

Answer 1

1.The brand of machinery used in the manufacturing process

This is not a relevant information in decision making. What is relevant is theCost/ Capacity and efficiency etc of the machinery for the purpose of making financial decisions. Brand name is a qualitative characteristic that will not help in making financial decisions.

2. Net Income

Net income is a relevant information. It is relevant in terms of making financial decisions as the same is a measure of financial information.

3.The schedule of future payments for operating leases

This is a relevant financial information. as it will help to determine future liability snd create provision for the same.

4.The average salary of employees for each department within the firm.

This is also a relevant information. It is a financial indicator. It will help to take financial decisions and this measure helps in comparison as well.

I hope the above solution and reasoning is clear to you...do let me know in case of any concerns.

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