Michelle Adrianna / 2201733616 / LA55

TUGAS GSLC

3. The IASB Framework includes four principal qualitative

characteristics, understandability, relevance, reliability and
comparability. Explain and discuss the meaning of each of these
characteristics.

The conceptual framework sets out four qualitative characteristics of

financial statements:
a. Understandability: The users should be able to understand and
appreciate the information.
Classifying, characterising and presenting information clearly
and concisely makes it understandable. While some phenomena are
unpredictable and cannot be made easy to understand, to avoid such
information would make the financial reports incomplete and
potentially misleading. Financial reports are prepared for users who
have a reasonable knowledge of business and economic activities and
who review and analyse the information with diligence.

b. Relevance: The information should be relevant to the users so that

they can make their decisions effectively.
Relevant financial information is capable of making a
difference in the decisions made by users. Financial information is
capable of making a difference in decisions if it has predictive value,
confirmatory value, or both. The predictive value and confirmatory
value of financial information are interrelated.

c. Reliability: The information should be factually accurate.

When an assets, liabilities, income and expenses are
recognized in balance sheet and income statement can be measured,
then it can be said reliable. Where the item's cost or value can be
measured with reliability.

d. Comparability: The users should be able to compare the information

with the peers or with previous years’ information.
Information about a reporting entity is more useful if it can be
compared with a similar information about other entities and with
similar information about the same entity for another period or
another date. Comparability enables users to identify and understand
similarities in, and differences among, items.