ACCA Strategic Professional · Strategic Business Reporting (International) · The applications, strengths and weaknesses of the accounting framework
Under the IASB Conceptual Framework for Financial Reporting, which pair of characteristics are identified as the fundamental qualitative characteristics of useful financial information?
The fundamental qualitative characteristics are relevance and faithful representation. Information must be capable of influencing users' decisions and must faithfully depict the economic phenomena it purports to represent. Comparability, verifiability, timeliness and understandability only enhance usefulness once the fundamental characteristics are present.
- ARelevance and faithful representationCorrect
- BComparability and verifiability
- CTimeliness and understandability
- DReliability and prudence
Explanation
The Conceptual Framework (2018) names relevance and faithful representation as the two fundamental qualitative characteristics. Comparability, verifiability, timeliness and understandability are enhancing characteristics. Reliability and prudence were not retained as separate fundamental characteristics, though neutrality is supported by prudence.
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