What are the qualitative characteristics of financial statements?

The following are all qualitative characteristics of financial statements:

• Understandability. The information must be readily understandable to users of the financial statements.
• Relevance. The information must be relevant to the needs of the users, which is the case when the information influences the economic decisions of users. This may involve reporting particularly relevant information, or information whose omission or misstatement could influence the economic decisions of users.
• Reliability. The information must be free of material error and bias, and not misleading. Thus, the information should faithfully represent transactions and other events, reflect the underlying substance of events, and prudently represent estimates and uncertainties through proper disclosure.
• Comparability. The information must be comparable to the financial information presented for other accounting periods, so that users can identify trends in the performance and financial position of the reporting entity.

Related Topics

Balance sheet overview
Income statement overview
Retained earnings statement
Statement of cash flows overview