ACCA Applied Knowledge · Financial Accounting · Qualitative characteristics of useful financial information
Information is relevant to users' decisions if it has predictive value, confirmatory value or both. Which of the following is an example of information with confirmatory value?
Actual annual revenue that lets investors check earlier forecasts is an example of confirmatory value. Confirmatory value means the information provides feedback that confirms or corrects previous evaluations. Budgets, intentions and market forecasts look ahead, so they relate to predictive value rather than confirming past assessments.
- AA budget showing expected profit for the next three years
- BActual annual revenue that lets investors check their earlier forecasts of revenueCorrect
- CA statement of the directors' intentions to open new stores next year
- DA market research report forecasting growth in demand for the entity's products
Explanation
Confirmatory value arises when information confirms or changes past evaluations. Actual revenue allows investors to compare it with their earlier forecasts. The other options are forward-looking items that relate to predictive value.
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