5.2 Qualitative characteristics of financial information

• What is the definition of relevance as a qualitative characteristic of financial information?

  Capable of making a difference
• Reliability ensures that information is free from material error and bias
• Reliability means that information is capable of influencing decisions.

  False
• Relevance ensures that information is free from bias.

  False
• What is the primary goal of reliability in financial information?

  To represent faithfully
• Comparability refers to the ability to identify similarities and differences
• Match each qualitative characteristic with its definition:

  Relevance ↔️ Capable of making a difference

  Reliability ↔️ Free from material error

  Comparability ↔️ Presented consistently over time

  Understandability ↔️ Presented in a clear manner
• Relevance signifies information that can make a difference in decision-making.
• Reliability requires that information is capable of making a difference in decision-making.

  False
• Reliability ensures that financial information is free from material error and bias
• Relevance in financial information means it is free from error and bias.

  False
• What is the purpose of understandability in financial information?

  Presents information clearly
• Comparability allows users to compare a company's financial performance over multiple years
• Consistency refers to the use of the same accounting policies and procedures over time
• What does verifiability ensure in financial information?

  Independent confirmation by parties
• Timeliness refers to information being available when it is needed
• Relevance in financial information helps users evaluate past, present, or future events.

  True
• What is the primary focus of reliability as a qualitative characteristic?

  Freedom from error and bias
• What does the reliability of financial information ensure?

  Freedom from error and bias
• Comparability refers to the ability to identify similarities and differences
• Comparability requires information to be presented consistently over time and between entities.

  True
• Why is consistency important in financial reporting?

  Allows meaningful comparisons
• What is the importance of timeliness in financial information?

  Enables prompt decision-making
• Match the qualitative characteristic with its importance:

  Timeliness ↔️ Enables prompt decision-making

  Relevance ↔️ Guides appropriate actions

  Reliability ↔️ Ensures trustworthy decision-making

  Comparability ↔️ Allows for comparative analysis
• What is one example of a meaningful comparison enabled by comparability?

  Company performance over years
• Relevance ensures that information is presented in a consistent manner over time.

  False
• Which qualitative characteristic ensures that users can depend on financial information to represent faithfully what it purports to represent?

  Reliability
• What is the key purpose of reliability in financial information?

  To be free from error
• Match each qualitative characteristic with its description:

  Relevance ↔️ Information that can influence decisions

  Reliability ↔️ Information free from material error

  Comparability ↔️ Consistency over time and entities

  Understandability ↔️ Presented in a clear and concise manner
• What is the definition of reliability in the context of financial information?

  Free from error and bias
• Comparability refers to the ability to identify similarities and differences
• Comparability allows users to compare financial performance across different industries.


  True
• How is comparability defined in the context of financial information?

  Consistent presentation over time
• Why is consistency important in financial reporting?

  Allows meaningful comparisons
• Verifiability enhances the overall reliability and trustworthiness of financial information.


  True
• How is timeliness defined as a qualitative characteristic of financial information?

  Information available when needed
• Relevance ensures that financial information can make a difference in users' decisions
• Reliability means that information is presented clearly for knowledgeable users.

  False
• Reliable information is free from material error and bias.


  True
• What does comparability allow users to compare in financial information?

  Company performance over years