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Understandability: an essential quality of the information provided in the financial statements is that
it is readily understandable by users .For these reason users are assumed to have a reasonable
knowledge of business and economic activities and accounting.
Relevance: information in financial statements should influences the economic decisions of users by
helping them evaluate past, present or future events or confirming or correcting their past evaluations.
The relevance of information is affected by its nature and materiality.
Reliability: information is useful when it is free from material error and bias and can be depended
upon by users to represent faithfully that which it purports to represent or could reasonably be
expected to represent. To be reliable then the information should:
- Be represented faithfully.
- Be accounted for and presented in accordance with their substance and economic reality and not
merely their legal form,
- Be neutral i.e. free from bias,
- Include some degree of caution especially where uncertainties surround some events and
transactions (Prudence),
- Be complete i.e. must be within the bounds of materiality and cost. An omission can cause
information to be false.
Comparability: Users must be able to compare the financial statements of an enterprise through time
in order to identify trends in its financial position and performance. Users must also be able to
compare the financial statements of different enterprises. Therefore users must be informed of the
different accounting policies. Changes in the various policies and the effect of these changes in the
accounts.
Compliance with International ccounting standards Promotes comparability of financial statements
among different organizations.
Kavungya answered the question on May 15, 2019 at 13:20