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

Lanto Co has a legal dispute where the outcome is uncertain. It omits all mention because disclosing it might worry users, even though users would be influenced by it. Which characteristic is most directly lacking?

Relevance is most directly lacking, because omitting information that could influence users' decisions makes the report deficient. Materiality is an entity-specific aspect of relevance, and the omission also leaves the depiction incomplete. The problem is not comparability, verifiability or timeliness.

  1. AComparability, because prior periods were not restated
  2. BRelevance, because omitting it could affect users' decisions, which is also a failure of completenessCorrect
  3. CVerifiability, because two observers might disagree
  4. DTimeliness, because the dispute is not yet resolved

Explanation

Information is material if omitting it could influence users' decisions, and materiality is an aspect of relevance. Omission also makes the depiction incomplete, affecting faithful representation. The question asks for the most direct characteristic, which is relevance via materiality.

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