Qualitative Features of Accounting Information
Added on 2019-11-26
15 Pages4707 Words162 Views
FINANCIAL ACCOUNTING
ContentsPart - I..........................................................................................................................................................2Introduction.................................................................................................................................................2Qualitative characteristics of accounting information.................................................................................2Conclusion...................................................................................................................................................4Part – II........................................................................................................................................................6Introduction.................................................................................................................................................6Concept of fair value...................................................................................................................................6Conclusion...................................................................................................................................................7Part – III (Intangibles)..................................................................................................................................9Introduction.................................................................................................................................................9Measurement and recognition....................................................................................................................9Evaluation on Harvey Norman...................................................................................................................10Conclusion.................................................................................................................................................11References.................................................................................................................................................122
AbstractThe chief objective of AASB is to shed light on the ideas that pertains to the financial information and its qualitative features. The presence of those qualitative features enables to provide meaningfulinformation that is of paramount use in terms of economic decision-making for the end users. In thisreport, the major stress is to consider the qualitative features that lead to a better decision-makingprocess. The report is introduced with the conceptual framework followed by the qualitative features that pertains to the accounting information. The accounting information is dealt in a detailed manner and a strong analysis is done in this regard. The report concludes with the fact that the qualitative features aids in enhancement of the value of the corporate reporting.Part - IIntroductionThe key objective of financial reporting is to offer high quality corporate financial information concerning various economic entities, especially of financial nature, useful in effective decision-making. Such provision of high-quality information is significant because it can assist in influencing stakeholders in making credit, investment, and other decisions that can enhance the overall efficiency of the market. According to the conceptual framework for financial reporting, financial information is useful only if it adheres to the qualitative characteristics. Business owners can utilize such accounting information to undertake a financial analysis of their companies. Without the presence of the proper information,it becomes difficult to take proper decision. The business owners are unable to take proper action if the qualitative features are absent. Such information plays a leading role in influencing the decision-making process. Decision making can be effective when the qualitative features are established and presented in a better fashion (Damodaran, 2010). Besides, qualitative characteristics consist of business owners’ perceived significance of the financial information.Qualitative characteristics of accounting informationThe fundamental qualitative characteristics are faithful representation and relevance that can enhance the quality of financial reporting. In short, the qualitative features helps in providing a strong foundation for the financial reporting and making decision-making more meaningful in 3
nature. Further, other characteristics like verifiability, timeliness, comparability, and understandability form part of the conceptual framework to enhance decision-usefulness when theseare properly established (IASB, 2010).Based on the conceptual framework, accounting information can be regarded as relevant if it possesses the ability to manipulate the financial decisions of users by assisting them to assess present, past, or future scenarios. This means that relevant information must have confirmatory or predictive value. Besides, the predictive value can assist users in assessing the past, future, and present events (Bodie et. al, 2014). Furthermore, to possess predictive value, information must not be in the kind of explicit forecast. Nevertheless, the capability to make anticipations from financial statements is maximized by the kind in which the detail on the past is reported. In addition, information can have confirmatory value if it assists the users in confirming or verifying their prior assessment. On a whole, information can be considered as relevant when it is offered in a timely way so that decision-making can be influenced. The second characteristic is a faithful representationthat represents faithfully the events and other transactions it intends to either depict or can reasonably be expected to depict. It involves recognition of all obligations and rights arising from an event and accounting for the event in such a way that depicts its economic substance (Deegan, 2011). The information must be accounted for and represented in relation to the economic substanceof a specific transaction and not simply its legal form. Further, the legal form of an event is not often consistent with the financial reality of the transaction. In such circumstances, the reporting of property sale will not faithfully depict the transaction entered into. To sum up, financial statements must represent faithfully every transaction and other events that can assist in giving rise to liabilities, assets, and owners’ equity. Further, the profit and loss statement of the company must depict the transaction faithfully that can give rise to income and expenditure in a particular period (Bence & Nadine, 2012). The third characteristic is materiality that assists in offering guidance as tohow a particular transaction must be classified in the financial statements and/or whether it must be disclosed separately instead of being aggregated with other items. Such characteristic assists in dictating any item or transactions that can significantly affect the financial statements, and which must be accounted for utilization of GAAP exclusively (IASB, 2010). In simple words, if an event or cost that happened during the year can influence how an investor must view the company, it mustbe accounted for utilizing GAAP on the financials. Nevertheless, transactions that are deemed to be immaterial can be ignored as they cannot influence how such investors can view the financials to make decisions (Fang & Jin, 2012). The fourth characteristic is comparability that assists an 4
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