ACCA Strategic Professional · Strategic Business Reporting (International) · Discussion of issues in financial reporting
Zentra plc is reviewing the qualitative characteristics in the Conceptual Framework for Financial Reporting. Which pair correctly identifies the two fundamental qualitative characteristics of useful financial information?
The fundamental qualitative characteristics are relevance and faithful representation. Information must be capable of influencing user decisions and must faithfully depict the economic phenomena it purports to represent. Comparability, verifiability, timeliness and understandability only enhance usefulness of information that already has these two.
- ARelevance and faithful representationCorrect
- BComparability and verifiability
- CTimeliness and understandability
- DPrudence and neutrality
Explanation
The Conceptual Framework identifies relevance and faithful representation as the fundamental characteristics. Comparability, verifiability, timeliness and understandability are enhancing characteristics. Prudence is not a separate characteristic, although it supports neutrality.
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