Chapter 2: Qualitative Characteristics of Useful Information. Relevance requires financial information to be related to an economic decision. The following is the text of the 'Framework for the Preparation and Presentation of Financial Statements' issued by the Accounting Standards Board of the Institute of Chartered Accountants of India. Two fundamental characteristics of financial statements are their truth and fairness. Financial statements are quantitative statements, based on numbers. The Board has confirmed a new approach to recognition, which requires decisions to be made by reference to the qualitative characteristics of financial information. Relevant: The information should be relevant to the users so that they can make their decisions effectively. FA2 Chapter 4 … Otherwise, the information is useless. The enhancing qualitative characteristic of understandability means that information should be understood by: A) Those who are experts in the interpretation of financial information. 2-6 Three levels: Overview of the Conceptual Framework CONCEPTUAL FRAMEWORK CONCEPTUAL FRAMEWORK First Level = Objectives of Financial Reporting Second Level = Qualitative Characteristics and Elements of Financial Statements Third Level = Recognition, Measurement, and Disclosure Concepts. These statements are universal; therefore, they are typically easy to understand by all stakeholders. Financial statements are meant to present the financial information of the entity in question as clearly and concisely as possible for both the entity and for readers. The eight phases of the joint FASB and IASB framework project are: 1) objective and qualitative characteristics, 2) elements and recognition, 3) presentation and disclosure, 4) reporting entity, 5) measurement, 6) framework for GAAP hierarchy, 7) applicability to the not-for-profit sector, and 8) any remaining issues needing to be addressed. Faithful presentation. Neutrality. The demand for accounting information by investors, lenders Top Banks in the USA According to the US Federal Deposit Insurance Corporation, there were 6,799 FDIC-insured commercial banks in the USA as of February 2014. LO 2 IFRS Qualitative Characteristics Of Financial Reporting : Financial statements are a structured representation of the financial positions and financial performance of an entity. The country's central bank is the Federal Reserve Bank, which came into existence after the passage of … That is why the FASB created the qualitative characteristics of financial information. This means that information must be clearly presented, with additional information supplied in the supporting footnote Therefore, financial statements should include the current year statements, the comprehensive income statement and statement of financial position, presented beside the prior year statements and it is also called as comparatives. Reliability. Faithful representation: Financial statements are complete and free from bias and […] Qualitative Characteristics and Accounting Principles - Free download as Powerpoint Presentation (.ppt / .pptx), PDF File (.pdf), Text File (.txt) or view presentation slides online. Businessmen and women along with investors and credits should however clearly understand the information presented in the financial statements. However, Para[F QC33] of Conceptual Framework says, enhancing qualitative characteristics, either individually or in group, render information decision useful if that information is irrelevant or not represented faithfully. What are the Qualitative Characteristics of Accounting Information? To a large extent, general purpose financial reports are based on estimate and judgment rather than exact depiction. Qualitative characteristics are the tributes that make the information provided in financial statements useful to users. C) Financial analysts. Faithfulness is another feature of fundamental qualitative characteristic. Reliability is considered the most important qualitative characteristic of financial statement data, comparability is considered second in importance, and uniformity is third. View cfas-chapter-2 (1).ppt from ACCTG MISC at Lyceum of the Philippines University. These decisions should be consistent with the objective of general purpose financial reporting and should yield information which possesses the qualitative characteristics set out in this Statement. However, the information they provide to the users have some important qualitative characteristics. 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