ACCA Applied Knowledge · Financial Accounting · Qualitative characteristics of useful financial information
A listed company changes the layout of its statement of profit or loss so that expenses are grouped by function rather than by nature, and it restates the prior year comparatives in the same layout. Which enhancing qualitative characteristic of useful financial information is most directly served by restating the comparatives?
The answer is comparability. Restating prior year comparatives in the new expense-by-function layout lets users compare the two periods on a consistent basis and identify trends and differences. Verifiability and timeliness address other matters, and faithful representation is a fundamental rather than an enhancing characteristic.
- AComparabilityCorrect
- BVerifiability
- CTimeliness
- DFaithful representation
Explanation
Restating the prior year figures in the new layout allows users to compare the current year with the previous year on a like-for-like basis, which is comparability. Verifiability concerns whether independent observers could reach consensus on the depiction. Timeliness concerns having information available in time to influence decisions. Faithful representation is a fundamental characteristic, not an enhancing one.
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