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Qualitative Characteristics |
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Fundamental Qualities (formerly Primary Qualities) |
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Relevance |
information must be capable of making a difference in a decision. |
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Ingredients of Relevance |
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predictive value--
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has value as an input to predictive processes used by investors |
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confirmatory value-- (formerly feedback value) |
helps users confirm or correct prior expectations. |
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Materiality– |
Information is material if omitting it or misstating it could influence decisions that users make on the basis of the reported financial information |
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Faithful Representation (formerly reliability) |
the numbers and descriptions match what really existed or happened |
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Ingredients of Faithful Representation |
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Completeness-- |
all the information that is necessary for faithful representation is provided |
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Neutrality-- |
cannot select information to favor one set of interested parties over another |
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free from error -- |
information item that is free from error will be a more accurate (faithful) representation of a financial item |
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Enhancing Qualities (formerly Secondary Qualities) |
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Comparability |
Information is measured and reported in a similar manner for different companies |
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Verifiability |
independent measurers, using the same methods, obtain similar results |
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Timeliness |
having information available to decision-makers before it loses its capacity to influence decisions |
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Understandability |
the quality of information that lets reasonably informed users see its significance |