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

Under the IASB Conceptual Framework, which statement about the cost constraint on useful financial reporting is correct?

The correct statement is that the costs of providing information should be justified by its benefits. Cost is a pervasive constraint on financial reporting, not a fundamental qualitative characteristic, and it applies to users as well as preparers.

  1. ACosts of providing information should be justified by the benefits of reporting itCorrect
  2. BInformation must be reported whenever it is available, regardless of cost
  3. COnly the preparers of the information should consider the cost
  4. DThe cost constraint is a fundamental qualitative characteristic

Explanation

The Framework identifies cost as a pervasive constraint on the information provided in financial reporting. The costs of providing information should be justified by the benefits. It is not a fundamental characteristic, and it is not limited to preparers, since users also bear costs of analysing information.

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