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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Qualitative Characteristics The following is a list of qualitative characteristics of useful accounting information identified in the FASB’s and the IASB’s Statement of Financial Accounting Concepts No. 8 and statements describing the qualities.

  1. A. Comparability
  2. B. Decision usefulness
  3. C. Relevance
  4. D. Faithful representation
  5. E. Predictive value
  6. F. Confirmatory value
  7. G. Verifiability
  8. H. Neutrality
  9. I. Free from error
  10. J. Consistency
  11. K. Materiality
  12. L. Timeliness
  13. M. Understandability
  14. N. Completeness

________ 1. Different knowledgeable and independent observers con reach consensus that a particular representation is faithful.

________ 2. Making information available to decision makers before it loses its capacity to influence decisions.

________ 3. Capacity to make a difference in a decision, enabling users to predict future outcomes and/or confirm prior expectations.

________ 4. Overall objective of financial information.

________ 5. Absence of bias intended to influence financial statement users’ behavior in a particular direction.

________ 6. Presented as accurately as possible, using a process that reflects the best available inputs.

________ 7. Helps decision makers form expectations about the future.

________ 8. Full disclosure of oil the information necessary to understand the information being reported.

________ 9. Enables users to identify and explain similarities and differences between two or more sets of economic foots.

________ 10. The nature and magnitude of on omission or misstatement that would influence the judgment of reasonable users of that information.

________ 11. Accounting methods and procedures applied in the some manner from period to period.

________ 12. Helps decision makers confirm or correct prior predictions or expectations.

________ 13. When the words and amounts accurately depict the economic substance of what they purport to depict.

________ 14. Comprehensible to users.

Required:

Place the appropriate letter identifying each quality on the line in front of the statement describing the quality.

To determine

Identify the quality and place them against the statement best describing the quality.

Explanation

Financial reporting:

Financial reporting is the procedure used to communicate the information obtained from financial statements prepared for a company. It is essential to disclose the data to various stakeholders of the company, as various decisions need to be taken by the stakeholders.

TermsDefinitions
G. Verifiability1Different knowledgeable and independent observers can reach consensus that particular representation is faithful.
L. Timeliness2Making information available to decision makers before it loses its capacity to influence decisions.
C. Relevance3Capacity to make a difference in a decision, enabling users to predict future outcomes and/or confirm prior expectations.
B. Decision usefulness4Overall objective of financial information.
H. Neutrality5Absence of bias intended to influence financial statement users’ behavior in a particular direction.
I. Free from error6Presented as accurately as possible, using a process that reflects the best available inputs.
E. Predictive value7Helps decision makers form expectations about the future.
N. Completeness8Full disclosure of all the information necessary to understand the information being reported.
A. Comparability9Enables users to identify and explain similarities and differences between two or more sets of economic facts.
K. Materiality10The nature and magnitude of an omission or misstatement that would influence the judgment of reasonable users of that information.
J. Consistency11Accounting methods and procedures applied in the same manner from period to period.
F. Confirmatory value12Helps decision makers confirm or correct prior predictions or expectations.
D. Faithful representation13When the words and amounts accurately depict the economic substance of what they purport to depict.
M. Understandability14Comprehensible to users.

Table (1)

Verifiability:

Verifiability is a qualitative characteristic, that emphasizes the accounting transactions must be recognized and recorded in the financial statement, should be realized and have supporting documents.

Timeliness:

Timeliness is a qualitative characteristic, that emphasizes the financial statement should be prepared in a timely basis of annual and quarterly, and make them be available to the users...

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