Page 24 - FINAL CFA SLIDES DECEMBER 2018 DAY 7
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Session Unit 6:
23. Financial Reporting Standards
LOS 23.d: Describe the International Accounting Standards Board’s conceptual framework,
including the objective and qualitative characteristics of financial statements, required
reporting elements, and constraints and assumptions in preparing financial statements, p.27
Qualitative Characteristics
• Relevance –influence decisions (predictive and/or confirmatory value);
Materiality is an aspect of relevance.
• Faithful representation (complete, neutral, and free from error).
4 characteristics enhance relevance and faithful representation:
• Comparability -consistent among firms and across time periods.
• Verifiability -independent observers, using the same methods, obtain similar results.
• Timeliness -information is available to decision makers before the information is stale.
• Understandability -Readily understand with reasonable effort and basic skill; but useful
information should not be omitted just because it is complicated.
