The preparation and presentation of financial statements depends on the Framework which was initially issued by the IASC in 1989 and later on followed by the IASB in 2001. The basic concepts to prepare the financial statements are described in the Framework. The framework…
The IASB’s present definition of reliability is: “Information has the quality of reliability when it is free from material error and bias and can be depended on by users to represent faithfully that which it either purports to represent or could reasonably be expected to represent” (IASB Framework, 1989, Para. 31).
The IASB Framework is meant to help not only standard setters but at the same time it assists the preparers of financial statements to apply international financial accounting standards when they deal with topics on which measures have not yet been formulated, auditors to form their views with regard to the financial statements, and users to interpret information which the financial statements contains. All the above mentioned purposes of a financial statement will be better served only if the concepts are sound, all-inclusive, and internally coherent.
The qualitative characteristics are the properties that make the information furnished in financial statements helpful to users. The four key qualitative characteristics are understandability, relevance, reliability and comparability. Of the mentioned qualitative characteristics, Relevance and faithful representation are basic qualitative characteristics and Comparability, verifiability, timeliness, and understandability are ornamental qualitative characteristics (Framework 24).
A crucial feature of the information furnished in financial statements is that it has to be promptly apprehensible by users. For this reason it is assumed that users have a rational knowledge of business and economic actions and accounting and a temperament to analyse the information with sensible thoroughness. But certain information with regard to complex matters, just because they are difficult to understand by users cannot be excluded. Such information is important from the view of its significance to the ...
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(Business Accounting Essay Example | Topics and Well Written Essays - 1500 Words - 3)
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