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  • Monday, April 28, 2025
  • The Financial Encyclopedia
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Accounting

  Accounting   |   Terms
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  • April 8, 2021
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Qualitative Characteristics

Financial information provided in financial reports (about an entity’s economic resources/ assets, liabilities and the effects of transactions/ events on such items) must possess specific qualitative characteristics, namely, relevance and faithful representation. For information to be relevant (for users), it must enable users to make better decisions as to their relationships with the entity. In other words, this information must be capable of improving such decisions either by embodying a predicative value (ability to help users predict future outcomes) and/ or confirmatory value (ability to confirm previous evaluations).

Financial information has also to faithfully represent specific phenomena in a manner that this information is complete (along with all necessary descriptions, explanations, etc.), neutral (bias-free) and free from error.


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