The Framework sets out the qualitative characteristics of useful
financial information. The Framework clarifies what makes financial
information useful, that is, information must be relevant and must
faithfully represent the substance of financial information.
Relevance and faithful representation remain as the two fundamental
qualitative characteristics.
The Conceptual Framework (2010) also identifies
comparability, verifiability, timeliness, and understandability as
the four enhancing qualitative characteristics:
- Comparability permits the identification and
understanding of similarities and differences between items of
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.
- Verifiability means that different observers
would independently agree that the information that is presented
faithfully represents the economic phenomena that it alleges to
represent. Verifiability helps to assure users that information
represents faithfully the economic phenomena it purports to
represent.
- Timeliness means that information is available
to decision-makers on a timely basis prior to the need for a
decision to be made. It shouldn't be significantly
delayed or else it will be of little or no value.
- Understandability means that the information
should be understandable by users who have a reasonable knowledge
of business and economic activities, and who are willing to
diligently study the information.