Question

BE2.1 (LO 2) Match the qualitative characteristics below with the following statements.
1. Relevance
2. Faithful representation
3. Predictive value
4. Confirmatory value
5. Comparability
6. Completeness
7. Neutrality
8. Timeliness

a. Quality of information that permits users to identify similarities in and differences between two sets of economic phenomena.
b. Having information available to users before it loses its capacity to influence decisions.
c. Information about an economic phenomenon that has value as an input to the processes used by capital providers to form their own expectations about the future.
d. Information that is capable of making a difference in the decisions of users in their capacity as capital providers.
e. Absence of bias intended to attain a predetermined result or to induce a particular behavior.

Answer 1

Answer:

The correct answer are:

a) Comparability.

b) Timeliness.

c) Predictive value.

d) Relevance.

e) Neutrality.

Explanation:

Main qualities of useful accounting information:

• Relevance: The accounting information is relevant if it is able to make a difference in a decision.

The relevant information has:

1. Predictive value
2. Feedback value
3. Punctuality

The accounting information is reliable to the extent that users can depend on it to represent the economic conditions or events that it intends to represent.

Reliable information has:

1. Verifiability
2. Fidelity of representation
3. Neutrality