Qualitative Characteristics
(Per FAS Concepts Statement No. 8)

Fundamental Qualities

 (formerly Primary Qualities)

Relevance

information must be capable of making a difference in a decision.

 

Ingredients of Relevance

 

predictive value--

 

has value as an input to predictive processes used by investors

 

confirmatory value--

(formerly feedback value)

helps users confirm or correct prior expectations.

 

Materiality–

Information is material if omitting it or misstating it could influence decisions that users make on the basis of the reported financial information 

Faithful Representation

(formerly reliability)

the numbers and descriptions match what really existed or happened

 

Ingredients of Faithful Representation

 

Completeness--

all the information that is necessary for faithful representation is provided

 

Neutrality--

cannot select information to favor one set of interested parties over another

 

free from error --

information item that is free from error will be a more accurate (faithful) representation of a financial item 

Enhancing Qualities

(formerly Secondary Qualities)

 

Comparability

Information is measured and reported in a similar manner for different companies

 

Verifiability

independent measurers, using the same methods, obtain similar results

 

Timeliness

having information available to decision-makers before it loses its capacity to influence decisions

 

Understandability

the quality of information that lets reasonably informed users see its significance