Please write a main post discussing the topic below and answer to the two classmates posts attached. (Citation is only needed for the main post.)
Topic: Discuss the qualitative characteristics of accounting information as defined by the IASB’s Framework for the Preparation of Financial Statements.
Include appropriate citations. (Citations only needed for main post)
Instructions for main post (Around 200 words)
Discuss the qualitative characteristics of accounting information as defined by the IASB’s Framework for the Preparation of Financial Statements.
Include appropriate citations. (Citations only needed for main post)
Instructions for the two classmate responses (around 150 words each)
Please, respond to the below two classmate main posts. (Please, the responses need to be a discussion, not an evaluation. You can agree with them and add/comment about their response.) Citation
Classmate post #1:
Laura Huguene
Prudence and faithful representation are qualitative characteristics of accounting information as defined by the IASB’s Framework for the Preparation of Financial Statements. “Prudence is defined as the exercise of caution when making judgments under condition of uncertainty” (Schroeder, Clark, & Cathy, 2017). Since there are times of uncertainty it can make the information less relevant. Therefore, there must be some trade-off between the level of uncertainty and other factors in order to make the information useful and relevant. “Faithful representation describes those aspects better than the previously used term, reliability” (Schroeder et al., 2017).
Further qualitative characteristics of financial statements include understandability, relevance, reliability, and comparability. For understandability, the “information must be clearly presented, with additional information supplied in the supporting footnotes as needed to assist in clarification” (Bragg, 2018). Relevance means that the information is relevant to the users such as those who use it to make financial decisions such as whether to invest in the company. Reliability means that the information is accurate and free of errors. Lastly, comparability means that “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” (Bragg, 2018).
References
Bragg, S. (2018, February 12). The qualitative characteristics of financial statements. Retrieved May 13, 2019, from https://www.accountingtools.com/articles/what-are-the-qualitative-characteristics-of-financial-statem.html
Schroeder, R. G., Clark, M., & Cathey, J. M. (2017). Financial accounting theory and analysis: Text and cases. Hoboken, NJ: Wiley.
Classmate post # 2:
Dayana Alvarez
The IASB’s main responsibilities are to develop and issue International Financial Reporting Standards (IFRSs). Its Framework for the Preparation and Presentation of Financial Statements help the IASB to develop future accounting standards, assist with national standard creators, help auditors to form an opinion on whether financial statements meet international standards, and help users to understand financial statements prepared in conformity with international standards (Schroeder, Myrtle, & Cathey, 2017). The framework identifies relevance and faithful representation as the two main qualitative characteristics of useful financial information (Analyst Prep, 2017). It is necessary for financial information to be relevant to the needs of the users because the information will influence their economic decisions (Bragg, 2018). Another important aspect for financial information is that it has to be faithfully represented which means that it will represent the economic events completely, neutrally, and free from error at all times (Analyst Prep, 2017).
Additionally, the Conceptual Framework identifies for enhancing qualitative characteristics: Comparability, Verifiability, Timeliness, and Understandability. Comparability is when the information provided must be comparable to the financial information presented in other accounting periods because this will help users to compare the economic trends and financial position of the entity (Bragg, 2018). Verifiability is when different users independently agree that the information presented in the Financial Statements is faithfully represented (Analyst Prep, 2017). Timeliness is when the information is available to decision makers in a timely manner. Lastly, understandability is when the information is readily available, clearly presented, and understandable to users of the financial statements (Bragg, 2018).
References:
Bragg, S. (2018). The Qualitative Characteristics of Financial Statements. Accounting Tools.
Retrieved from https://www.accountingtools.com/articles/what-are-the-qualitative-characteristics-of-financial-statem.html
International Accounting Standards Board’s Conceptual Framework. (2017). Analyst Prep.
Retrieved from https://analystprep.com/cfa-level-1-exam/financial-reporting-and-analysis/iasb-conceptual-framework/
Schroeder, R. G., Myrtle, W. C., & Cathey, J. M. (2017). Financial Accounting Theory and
Analysis: Text and Cases (12th ed.). Hoboken, NJ: Wiley
