Qualitative Characteristics of Financial Information Essay

Qualitative Characteristics of Financial discipline - Essay role modelThe education is non just useful for the capital grantrs but also to the other user groups much(prenominal) as government, regulatory bodies etc. The next level of conceptual framework is the fundamental concepts i.e. qualitative characteristics of monetary information and elements of monetary statements. The third level is the implementation level, which contains recognition, disclosure and measurement concepts through principles, assumptions and constraints (Appendix 1). The qualitative characteristics of financial information are an important part of the total conceptual framework because they act as a bridge between the first level and third level of the framework. However, the definition of quality threshold of materiality and the conflicts between prudence and neutrality, and relevance and reliability has always been debated. In addition to the discussion of these constraints, this essay presents the abstract theoretical account for Financial Reporting 2010 provided by IASB as to how the new framework has placed these characteristics. ... The Conceptual Framework for Financial Reporting 2010 or commonly referred to as Framework 2010 states the objective of financial account that is to provide the financial information related to the reporting entity that can be helpful to investors and creditors in qualification distract decisions (McConnell, 2011). Therefore, in order for the financial information to be useful, it must possess some characteristics such(prenominal) as materiality, prudence, neutrality, relevance and reliability. An information is considered material if its misstatement, modification or default can influence the economic decisions of the users, taken on the basis of that information. Materiality depends on the magnitude of the error in circumstances when the misstatement or omission has taken place. The financial statements are prepared in an uncertain en vironment due to many events such as useful life of fixed assets, collectability of doubtful receivables, and warranty claims. These uncertainties are recognized by employment prudence while preparing the financial statements. Prudence means making careful judgement in making estimates in the uncertain conditions, so that the income or assets are not overstated and expenses or liabilities are not understated (IASC Foundation and IASB, 2008, p.25). Neutrality means that the financial information should be free from any warp and does not influence decision making in order to achieve predetermined outcome. Financial information is useful if it has the quality of influencing decisions by helping the users in evaluation of past, future and present events related to the reporting entity. The past information regarding the financial position and performance is frequently used for predicting the future performance and position. Information is