Under the IASB Conceptual Framework, which two characteristics are the fundamental qualitative characteristics of useful financial information?
Answer and explanation
Correct answer: B. Relevance and faithful representation
- Step 1: The Conceptual Framework names two fundamental characteristics: relevance and faithful representation.
- Step 2: Comparability, verifiability, timeliness and understandability only enhance information that already has these two.
- Step 3: Neutrality is a component of faithful representation.
Answer
Relevance and faithful representation.
Why not the others: Comparability and verifiability: These are enhancing characteristics that make information that is already relevant and faithfully represented more useful. Timeliness and understandability: These are also enhancing characteristics, not fundamental ones. Neutrality and prudence: Neutrality supports faithful representation, but neither is itself a fundamental characteristic.
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