Under the IFRS Conceptual Framework, which pair are the two 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 that information must have to be useful.
- Step 2: Information must be relevant to users' decisions and must faithfully represent what it purports to represent.
Answer
Relevance and faithful representation.
Why not the others: Comparability and verifiability are enhancing characteristics, which add to usefulness only after the fundamental ones are met. Timeliness and understandability are also enhancing characteristics. Materiality is an entity-specific aspect of relevance and prudence supports neutrality, so neither is a fundamental characteristic in its own right.
Practise more Accounting concepts, ethics and sustainability.
Free questions with an explanation for every one, and full timed ICAEW ACA Certificate Level mock tests.
More Accounting concepts, ethics and sustainability questions
- A company's financial statements are prepared on the going concern basis. What does this assume?
- A sole trader pays £7,200 on 1 November for insurance covering the 12 months to 31 October the following year. The year end is 31 December.…
- Which of the following is the Conceptual Framework's definition of an asset?
- Goods are sold to a customer who has the right to require the seller to buy them back at the original price plus 10% after one year. Which c…
- Which statement about the 'true and fair view' override is correct for a company reporting under IFRS?
- Which body issues IFRS Accounting Standards?