Question

Under ifrs, which of the following is a fundamental qualitative characteristic of financial information?

a.relevance
b.reliability
c.parability
d.understandability

Answer 1

The correct answer to the question is relevance, as it is one of the two fundamental qualitative characteristics of financial information under IFRS; the other being faithful representation.

Step-by-step explanation:

Under IFRS (International Financial Reporting Standards), there are two fundamental qualitative characteristics of financial information. These are relevance and faithful representation. Previously, reliability was considered a fundamental qualitative characteristic, but it has since been replaced by faithful representation in the conceptual framework for financial reporting. Even so, the attribute of reliability is not entirely discarded; it is instead encompassed within the broader term of faithful representation, which implies that financial information accurately depicts the phenomena it purports to represent.

As such, the correct answer to the student's question would be: a. relevance, which along with faithful representation, provides the most useful information for decision-making.

Other qualitative characteristics mentioned in the framework include comparability, verifiability, timeliness, and understandability, which support the fundamental qualities in making the information useful to various users.

Answer 2

The fundamental qualitative characteristic of financial information under IFRS is relevance. Relevance means that the information provided is useful and has the potential to impact decision-making for users of the financial statements.

Step-by-step explanation:

The fundamental qualitative characteristic of financial information under International Financial Reporting Standards (IFRS) is relevance. Relevance means that the information provided is useful and has the potential to impact decision-making for users of the financial statements.

For example, if a company reports its sales revenue and expenses accurately and in a timely manner, investors, creditors, and other stakeholders can use this information to assess the company's profitability and financial performance. While reliability, comparability, and understandability are also important qualitative characteristics of financial information, relevance is considered fundamental as it ensures that the information is meaningful and has a direct impact on decision-making.