CPA Review Notes

Qualitative Characteristics of Financial Statements

Posted on: June 13, 2012


-        the attributes that make the information provided in financial statement useful to users.

U  1) Understandability

R  2) Relevance

R  3) Reliability

C  4) Comparability



-        Users are assumed to have a reasonable knowledge of business and economic activities and accounting

-        Willingness to study the information with reasonable diligence


2)      RELEVANCE (3)

-        It influences the economic decisions of users by helping them evaluate past, present or future events or confirming, or correcting their past evaluations

a)      Predictive Values

b)      Feedback/Confirmatory Values

c)      Materiality

-        Its omission or misstatement could influence economic decisions



-        Free from material error and bias and can be depended upon by users to represent faithfully

a)      Faithful Representation

b)      Substance Over Form

c)      Neutrality

d)      Prudence

-        The inclusion of a degree of caution in the exercise of the judgements needed in making the estimates required under conditions of uncertainty such that assets or income are not overstated and liabilities or expenses are not understated

e)      Completeness

-        Omission can cause info to be false/misleading



-        Users must be able to compare the financial statement of an entity through time in order to identify trends in its financial position and performance


Constraints on Relevant & Reliable Information (3)

  1. TIMELINESS – Relevance and Reliability

-        The overriding consideration is how best to satisfy the economic decision-making needs of users.

  1. Balance between BENEFIT and COST
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8 Responses to "Qualitative Characteristics of Financial Statements"

thanx it has really helped

It is well stated but simple examples will make them clear..

Thanx it was helpful

Nakazzi mary Ndejje university kampala campus
Thanks it was of great use

i got points from here 4 mi research,thnx ssali mtac

Its been great,betty has enjoyed it

great I’ve enjoyed it !and it was helpful,…

I need information about conceptual frame of accounting .and Its relation with standerds

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