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22 Nov
2020

Discuss the qualitative characteristics of accounting information as defined by the IASB’s Framework for the Preparation of Fina…

Category:ACADEMICIAN

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Original Question: (Do not reply to this one)
Discuss the qualitative characteristics of accounting information as defined by the IASB’s Framework for the Preparation of Financial Statements.
Student Discussions:
Reply to each student posts by commenting about their posts and building on the subject (About 100 words each) APA reference.
APA reference. Any sources including, but not limited:
Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2017).Financial accounting theory and analysis: Text and cases(12th ed.). Hoboken, NJ: Wiley.
1-Ekaterina Cafano
Financial statement users, such as investors and creditors rely on the company’s financial statements in order to make an educated decision about company’s financials. Therefore the information presented in the financial statements must be useful. In order for the information to be useful, the information must possess the qualitative characteristics. The Conceptual Framework of 2010 issued by IASB identifies the two fundamental qualitative characteristics of financial information: relevance and faithful representation. Financial information is relevant if it makes a difference on the financial statement user decision. For example, if an automobile company plans on building a brand new plant that will increase efficiency in the production, it must disclose this cost. The cost that was incurred and recouped to build the production plant that is no longer being used is irrelevant to the decision making process. Faithful representation means that the information represents the true picture. Faithful representation is important because the users of that information rely on it when making a decision. The users might not have the time or resources to evaluate the information for faithfulness. In addition, IASB identifies the four characteristics that enhance the accounting information: comparability, verifiability, timeliness and understandability.
2-Dayana Alvarez
The IASB’s main responsibilities are to develop and issue International Financial Reporting Standards (IFRSs). Its Framework for the Preparation and Presentation of Financial Statements help the IASB to develop future accounting standards, assist with national standard creators, help auditors to form an opinion on whether financial statements meet international standards, and help users to understand financial statements prepared in conformity with international standards (Schroeder, Myrtle, & Cathey, XXXXXXXXXXThe framework identifies relevance and faithful representation as the two main qualitative characteristics of useful financial information (Analyst Prep, XXXXXXXXXXIt is necessary for financial information to be relevant to the needs of the users because the information will influence their economic decisions (Bragg, XXXXXXXXXXAnother important aspect for financial information is that it has to be faithfully represented which means that it will represent the economic events completely, neutrally, and free from error at all times (Analyst Prep, 2017).
Additionally, the Conceptual Framework identifies for enhancing qualitative characteristics: Comparability, Verifiability, Timeliness, and Understandability. Comparability is when the information provided must be comparable to the financial information presented in other accounting periods because this will help users to compare the economic trends and financial position of the entity (Bragg, XXXXXXXXXXVerifiability is when different users independently agree that the information presented in the Financial Statements is faithfully represented (Analyst Prep, XXXXXXXXXXTimeliness is when the information is available to decision makers in a timely manner. Lastly, understandability is when the information is readily available, clearly presented, and understandable to users of the financial statements (Bragg, 2018).

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