Comparability implies to have like things reported in a similar fashion and unlike things reported differently. The ultimate purpose of accounting standards is to establish a common set of procedures and rules in preparing financial statements, thereby preventing misunderstandings between and among the preparers and users of accounting information. It may, in fact, favour certain interests, but only because the information points that way. 2 CON2 Status Page Qualitative Characteristics of Accounting Information May 1980 Financial Accounting Standards Board of the Financial Accounting Foundation 401 MERRITT 7, P.O. Understandability 2. This guide will outline the most common sources of public company filings. Understandability is the degree to which information is easily understood. To be useful information must be reliable as well as relevant. Concepts Statement No. Reliability is described as one of the two primary qualities (relevance and reliability) that make accounting information useful for decision-making. Answer: Introduction. The country's central bank is the Federal Reserve Bank, which came into existence after the passage of the Federal Reserve Act in 1913, creditors, etc., creates fundamental qualitative characteristics that are desirable in accounting information. Economic decision requires making choice among possible courses of actions. Information should be disclosed in the annual report which is likely to influence economic decisions of the users. To assist the International Accounting Standards Board to develop IFRS Standards B. Furthermore, accounting standards should remove subjectivity that could lead to inaccurate information. Image Guidelines 5. Two of the six qualitative characteristics are fundamental (must have), while the remaining four qualitative characteristics are enhancing (nice to have). Characteristics of International Accounting Standards and Their Implications for International Business. Relevance 2. Privacy Policy 8. Information that is understandable to the average user of financial statements is highly desirable. Qualitative characteristics are the tributes that make the information provided in financial statements useful to users. Comparability is the degree to which accounting standards and policies are consistently applied from one period to another. The fundamental (primary) and enhancing (secondary) qualitative characteristics, Qualitative Characteristics of Accounting Information, According to the US Federal Deposit Insurance Corporation, there were 6,799 FDIC-insured commercial banks in the USA as of February 2014. The most important characteristics of an accountant are what will drive them to go above and beyond the call of duty. The benefits of information may be increased by making it more understandable and hence useful to a wider circle of users. Qualitative characteristics of accounting information There are four (4) qualitative characteristics of accounting information that serve as the basis … Enroll now for FREE to start advancing your career! The concept of materiality permeates the entire field of accounting and auditing. Start now! The qualitative characteristics that have been found possessing wider acceptance and recognition in accounting literature are as follows: Relevance is closely and directly related to the concept of useful information Relevance implies that all those items of information should be reported that may aid the users in making decisions and/or predictions. Reliability This implies that the accounting information that is presented is truthful, accurate, complete (nothing significant missed out) and capable of … Characteristics of generally accepted accounting principles include all of the following except a. authoritative accounting the rule-making body established a principle of reporting. Salvage value is also known as scrap value, depreciation method, and useful life, the accountant should be able to reproduce the same result. Information that meets this requirement is material. Innovativeness, reliability and organizational skills are what separate bare-minimum accountants from true professionals. Consistent use of accounting principles from one accounting period to another enhances the utility of financial statements to users by facilitating analysis and understanding of comparative accounting data. Comparability 5. Characteristics of Accounting Standards and SEC Review Comments Jeff P. Boone; Jeff P. Boone Jeff P. Boone and Cheryl L. Linthicum are Professors at The University of Texas at San Antonio, and April Poe is an Assistant Professor at the University of Incarnate Word. To keep learning and advancing your career, the following CFI resources will be helpful: Learn accounting fundamentals and how to read financial statements with CFI’s free online accounting classes. Reliability is that quality which permits users of data to depend upon it with confidence as representative of what it purport to represent. The objectives of (general purpose) financial reporting serve many different information users who have diverse interests, and no one predetermined result is likely to suit all users’ interests and purposes. International Financial Reporting Standards, commonly called IFRS, are accounting standards issued by the IFRS Foundation and the International Accounting Standards Board. They provide uniformity in accounting which makes the financial statements of different business units, for different years comparable and again facilitate decision making. A neutral choice between accounting alternatives is free from bias towards a predetermined result. Financial statements that are comparable, with consistent accounting standards and policies applied throughout each accounting period, enable users to draw insightful conclusions about the trends and performance of the company over time. BOX 5116, NORWALK, CONNECTICUT 06856-5116 C) Promotes the use of high-quality, understandable global accounting standards. Reliable information is required to form judgments about the earning potential and financial position of a business firm. 2) By clicking on the ACCEPT button, you confirm that you have read and understand the FASB Website Terms and Conditions. Reliability 4. For example, a company experiencing a strong quarter and presenting these improved results to creditors is relevant to the creditors’ decision-making process to extend or enlarge credit available to the company. 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