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Cornerstones of Financial Accounti...
Information that provides feedback about prior expectations is:
Relevant Faithfully Represented
a. Yes Yes
b. No Yes
c. Yes No
d. No No
Introduction:A financial information is useful if it is created and compiled for existing as well as potential investors, lenders and other creditors for making vital investment and credit decisions. The fundamental characteristics of useful information as stated in Financial Accounting Standards Board (FASB) includes relevance and faithful representation which means that the information represented in financial statements should be relevant to the business in predicting future events and making prior changes in business decisions. Also, the financial statements should be complete and faithful representation of the information with utmost accuracy.
To choose-If the information that provides feedback about prior expectation is relevant and/or faithfully represented information.
Explanation for correct answer-
Option C which is information that provides feedback about prior expectation is relevant information and not a faithfully represented information.An information is relevant if it can make changes in business decisions by helping external users predicting future events or providing confirmatory feedback about prior expectations. Thus, such an information is not a faithful representation of information.
Explanation for incorrect answer-
Option A-An information which provides feedback about prior expectation is a relevant information. But a faithful representation of information means that the information provided in financial statements should be complete for the user to understand the economic event and as much accurate as possible...
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