What are the qualitative characteristics?
Qualitative characteristics concerning accounting or financial information are a conceptual framework of data. Four common characteristics include relevance, reliability, understandable and comparable. Each of them allows companies to prepare financial information that is in line with national standards. Companies can also provide information relevant to decision -making on expansion of business operations. Qualitative characteristics can also be a requirement for information published by the general public.
Relevance in terms of qualitative characteristics means that the company's information is useful and timely. Each prepared message must have a specific period of time. This ensures that the owner or manager can make a decision based on all inputs and/or outputs from the specified time period. When collecting information for decision -making, the owners and managers can apply for a specific period of time for their information. This will strengthen the meaning of relúdaIt's all about.
Financial information must be given reliability. Reliability suggests that all prepared information has no opinion or opinion. For example, accountants may not be willing to report significantly negative information to higher executives. However, the accountant is obliged to provide information with the reliability that all data is true and precisely shows the performance of the company. Information published to the general public must have a high degree of reliability to avoid misleading investors.
Financial information must be understandable. Qualitative characteristics usually lead to companies preparing common statements such as balance sheet, profit and loss statement and cash flow extract. These statements are universal; Therefore, they are usually easy to understand from all parties. Internal messages must also have the same level understands. The accountant or financial managers must be interestedOut the same approach to preparing comprehensible messages for internal inspection.
Comparison means that companies can review and compare their financial information with other companies. Qualitative characteristics also dictate that comparable financial information enables internal comparison. Owners and managers can review the current period against the previous period to analyze trends. This allows you to discover the increase and decrease in the company's specific areas.
There is a necessary balance in qualitative characteristics. For example, relevance requires information to be timely. However, accountants may not have the time to prepare information. The purpose then becomes reliable information in the amount of time provided. From this point of view, reliability is more important than timeliness. Accountants must also ensure that they meet standards that require neutral reports mixed with the Prudent calculations.