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DipIFRS ACCA course - IAS1 Enhancing qualitative characteristics No.7

DipIFRS ACCA course - IAS1 Enhancing qualitative characteristics No.7


The qualitative characteristics that enhance the usefulness of relevant and faithfully represented information include each of:
1. Comparability.
2. Verifiability.
3. Timeliness.
4. Understandability.
Now let's review each of these characteristics


1. Comparability:


Reporting enterprise information is more useful if it can be compared with similar information about other entities and with similar information about the same entity for another period or date. Comparability allows users to define and understand:
1. Similarities.
2. Differences.
Among the elements of the facility's financial report.
Hence, it can be said Comparability refers to the ability to identify the similarities and differences between items. Consistency (using the same accounting policies and procedures within the organization from period to period or in one period across organizations) helps with comparability.
Note that in the event of a change in accounting policies, it is retrospectively applied to the financial statements to maintain comparability !!
Thus, the financial analyst must take the difference in the accounting policies in the two accounts when comparing two companies


2. Verifiability:


Verifiable helps reassure users that the information faithfully represents the economic phenomena it claims to represent.
Verifiable means that different independent and informed observers can ..
reach consensus .. though not necessarily a complete agreement .. on the conclusions.
Note that in some cases verifiability is not possible, so the lack of verification does not mean that the financial statements are of no value !!
It is meant that there is no possibility of verification that there are no source documents .. Serially-numbered documents


3. Timeliness:


Timeliness means that information is available to decision makers at the right time to be able to influence their decisions
Note that it does not mean that the financial information provided at the wrong time does not mean that this information is misleading !!


4. understandability:


Classifying, describing and presenting information with clarity and precision makes it understandable. While some phenomena are complex in nature and cannot be easily understood and thus exclusion of such information may make financial reports:
1. Incomplete.
2. potentially misleading.
Financial reports are prepared for users with reasonable knowledge of:
1. Business activities.
2. Economic activities.
And who do:
1. Review the information.
2. Analyze the information.


Be aware that:
the enhancement of the specific characteristics should be maximized as necessary. However, enhancing the qualitative characteristics (either individually or collectively) cannot make the information useful if that information:
1. irrelevant.
2. Or not faithfully represented.


the cost constraint on useful financial reporting:


Cost is a widespread constraint on information that can be provided through general purpose financial reporting.
Reporting this information imposes costs and these costs must be justified by the benefits of reporting that information.


The International Accounting Standards Board (IASB) assesses the costs and benefits .. cost constraint .. in relation to financial reporting in general and not just in relation to the individual reporting entities. The International Accounting Standards Board (IASB) will consider whether different entity sizes and other factors justify different reporting requirements in specific situations.



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