Question 1 Financial Accounting Assi PDF

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The Framework for the Preparation and Presentation of Financial Statements identifies enhancing qualitative characteristics as comparability, verifiability, timeliness and understandability. Discuss how these enhancing qualitative characteristics improve the quality of information for users’ decision making. Comparability, verifiability, timeliness and understandability are identified as enhancing qualitative characteristics. They increase the usefulness of information that is relevant and faithfully represented. The conceptual framework identifies them, like the name states, as characteristics that “enhance” the quality of information. It also allows the performance of businesses around the globe to be compared, by companies preparing their annual reports using the same set of accounting standards and principles. Ultimately, comparability allows for “information to be compared within, and across entities” (The Economic times, 2018). Comparability is important as it “addresses the usability of financial information” (My Accounting course, 2018), and gives investors, lenders and other creditors the opportunity to make informed decisions, based on the comparable statements, created by using a consistent set of rules and standards (Tandfonline, 2013). Without the characteristic of comparability financial statements would be close to useless, as there would be no way to compare performance between two businesses. Similarly, there would also be no benchmark to identify the similarity or differences from one entity to another. (My Accounting course, 2018). Verifiability is another of the four enhancing characteristics. Verifiability provides assurance to users that financial results are credible and reliable by being able to be verified through an audit, (Kaplan, 2012). Thus, meaning that businesses must be able to show how and where they obtain their results through the use of supporting evidence (Kasturi S, 2017). Information is considered to be verifiable when other independent people or accountants are able to establish and conclude where the information has come from and “that the information is a fair reflection of the circumstances. If information is not verifiable, users have no sound basis to trust information or the entity behind it” (Accounting simplified, 2018). Timeliness, like comparability has a name that speaks for itself. Timeliness ensures that financial reports are completed in a timely manner, before any deadlines or without delays. “Information must be [provided] to users quickly enough for them to take action” (Kasturi S, 2017). Timeliness is important as information becomes of no use after a certain amount of time, so it’s in the best interest of the entity as well as users that reports are prepared on time. Lastly, understandability ensures that information is understandable to those who have interest in it. Information can be deemed understandable through using adequate “classification, characterization and representation of information” (Kaplan, 2012). Understandability further states that a company should offer financial information that is clear and concise. Enhancing qualitative characteristics improve the quality of information for users by ensuring that users have many avenues to ensure that the decisions they are making are beneficial to them. From comparability ensuring that all reports are based upon the same standards to

verifiability ensuring that there is sufficient evidence supporting results. Users are then able to take all of this information and make better and more accurately informed decisions. The characteristics “make is easier for users to utilize a company’s financial statements and information” (Corporate finance institute, 2018).

References The Economic Times. (2018). Definition of Standard Deviation | What is Standard Deviation ? Standard Deviation Meaning - The Economic Times. [online] Available at: https://economictimes.indiatimes.com/definition/standard-deviation [Accessed 13 Sep. 2018]. My Accounting Course. (2018). Comparability | Definition | Examples | Accounting Principle. [online] Available at: https://www.myaccountingcourse.com/accountingprinciples/comparability [Accessed 20 Sep. 2018]. Tandfonline.com. (2013). [online] Available at: https://www.tandfonline.com/doi/full/10.1080/21697221.2013.781765?src=recsys& [Accessed 20 Sep. 2018]. Kaplan.co.uk. (2012). [online] Available at: http://kfknowledgebank.kaplan.co.uk/KFKB/Wiki%20Pages/The%20Qualitative %20Characteristics%20of%20Financial%20Information.aspx [Accessed 20 Sep. 2018]. Kasturi, S. (2017). Qualitative Characteristics of Financial Reporting. [online] Linkedin.com. Available at: https://www.linkedin.com/pulse/qualitative-characteristics-financial-reportingshyam-sunder-kasturi [Accessed 20 Sep. 2018]. accountingverse.com. (2018). Qualitative Characteristics of Financial Information AccountingVerse. [online] Available at: https://www.accountingverse.com/financialaccounting/introduction/qualitative-characteristics.html [Accessed 20 Sep. 2018]. Accounting-simplified.com. (2018). Verifiability in Accounting | Concept and Examples. [online] Available at: https://accounting-simplified.com/financial/concepts-andprinciples/verifiability.html [Accessed 20 Sep. 2018]. Corporate Finance Institute. (2018). Qualitative Characteristics of Accounting Information Overview, Guide. [online] Available at: https://corporatefinanceinstitute.com/resources/knowledge/accounting/qualitativecharacteristics-of-accounting-information/ [Accessed 20 Sep. 2018]....