Qualitative

Characteristics
of
Financial Statement

Maitem, Reyna Rin

 FAITHFUL
RELEVANCE REPRESENTATION

COMPARABILITY VERIFIABILITY TIMELINESS UNDERSTANDABILITY

 The characteristic of relevance
implies that the information should have
predictive and confirmatory value for
RELEVANCE
users in making and evaluating economic
decisions. The relevance of information is
affected by its nature and materiality.
Information is material if omitting it or
misstating it could influence decision
making. A financial report should include
all information which is material to a
particular entity.
 The characteristic of faithful
FAITHFUL
representation implies that
REPRESENTATION financial information faithfully
represents the phenomena it
purports to represent. This
depiction implies that the
financial information is complete,
neutral and free from error.
 The characteristic of comparability implies that
users of financial statements must be able to
compare aspects of an entity at one time and
overtime, and between entities at one time and
overtime.

Therefore, the measurement and

display of transactions and events should be
COMPARABILITY carried out in a consistent manner
throughout an entity, or fully explained if
they are measured or displayed differently.
 The characteristic of
verifiability provides assurance VERIFIABILITY
that the information faithfully
represents what it purports to be
representing.
TIMELINESS
The characteristic of
timeliness means that the
accounting information is
available to all stakeholders in
time for decision-making
purposes.
 The characteristic of understandability
implies that preparers of information have
classified, characterised and presented the
information clearly and concisely.

The financial reports are

prepared with the assumption that
its users have a ‘reasonable UNDERSTANDABILITY
knowledge’ of the business and its
economic activities.
Summary:

Qualitative characteristics can be

differentiated into Fundamental and Enhancing
qualitative characteristics.

The two fundamental qualitative

characteristics of financial reports are relevance
and faithful representation. The four enhancing
qualitative characteristics are comparability,
verifiability, timeliness and understandability.
Thank you for your attention.
God Bless.