The International Accounting Standards Board (IASB) Framework requires that a useful set of financial statements should be reliable. Explain five qualities of financial statements that make...

The following are the characteristics of a reliable set of financial statements

i) Faithful representation
This is the requirement for consistency between claims made in the financial statements and the economic reports and the actual financial state of the entity.

ii) Representation quality (verifiability)
The accounting results are verifiable if, given the same data and assumptions, an independent accountant can produce the same result the company did.

iii) Neutrality
Financial statements should not be prepared to favour a certain group of users (for example management, shareholders, investors etc.)

iv) Prudence
This means that one should not overestimate the amount of revenues that are recorded or underestimate the amount of expenses. One should be conservative in recording assets and should not underestimate liabilities.

v) Completeness
This means that all the information that is needed to faithfully represent economic reality must be included. Further, all of the disclosures required under IFRS must be made in the audited annual and the published interim financial statements.

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marto answered the question on February 13, 2019 at 07:58