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ACCA Applied Knowledge · Financial Accounting · Qualitative characteristics of useful financial information

A company spends a very large amount of effort tracking the cost of each individual stationery item, which has an immaterial effect on profit. Which concept does this most clearly breach in terms of the Conceptual Framework?

The company breaches the cost constraint. Detailed tracking of immaterial stationery items consumes resources, yet the resulting information would not influence users' decisions, so its benefits do not justify the costs of producing it.

  1. AVerifiability, because the costs cannot be checked
  2. BThe cost constraint, because the benefit of the information does not justify the cost of producing itCorrect
  3. CTimeliness, because the information is out of date
  4. DComparability, because the costs differ between periods

Explanation

Tracking immaterial items in great detail costs effort and time while giving users almost no useful information. The benefits do not justify the costs, which is the cost constraint. Nothing in the scenario suggests the information is unverifiable, late or inconsistent between periods.

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