Question

What are the fundamental qualitative characteristics identified by the Conceptual Framework? (Describe each)

Answer 1

The Conceptual Framework identifies two fundamental qualitative characteristics: relevance and faithful representation. These characteristics ensure that financial information is useful, comparable, understandable, and aids decision-making.

Step-by-step explanation:

Fundamental Qualitative Characteristics Identified by the Conceptual Framework:

The Conceptual Framework identifies two fundamental qualitative characteristics:

1. Relevance: Information is relevant if it helps users make predictions about future outcomes or confirms or corrects previous expectations. For example, financial statements must include information that is relevant to investors and creditors to make informed decisions about a company's financial position and performance.
2. Faithful representation: Information must faithfully represent the economic phenomena it purports to represent. This means that the information should be complete, neutral, and free from error. For example, financial statements should faithfully represent a company's financial position, performance, and cash flows.

These fundamental qualitative characteristics help ensure that financial information is useful to its intended users and promotes comparability, understandability, and decision-making.