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SFAC No 8

Here are the key points about neutrality on faithful representation characteristic from SFAC No. 8: - Neutrality means that the financial information is free from bias. It is prepared without undue influence from parties that may have a stake in the financial reporting outcomes. - If the neutrality characteristic of faithful representation is not fulfilled, the financial information may be biased or slanted in a way that is misleading to users. It would not provide an unbiased representation of the underlying economic phenomena. - Lack of neutrality could occur if there are omissions or distortions in the selection or presentation of financial information that sway the primary users' judgment or decision in a particular direction. So in summary, neutrality is

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Dessy Tri Bhuwana
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298 views1 page

SFAC No 8

Here are the key points about neutrality on faithful representation characteristic from SFAC No. 8: - Neutrality means that the financial information is free from bias. It is prepared without undue influence from parties that may have a stake in the financial reporting outcomes. - If the neutrality characteristic of faithful representation is not fulfilled, the financial information may be biased or slanted in a way that is misleading to users. It would not provide an unbiased representation of the underlying economic phenomena. - Lack of neutrality could occur if there are omissions or distortions in the selection or presentation of financial information that sway the primary users' judgment or decision in a particular direction. So in summary, neutrality is

Uploaded by

Dessy Tri Bhuwana
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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I MADE FERY ADITYA (1607531137)

I GUSTI AYU TRI BHUWANA DEWI (1607531067)


SFAC No. 8
SFAC No. 8 this was basically created by the FASB to accommodate convergenceaccounting
standards with the International Financial Reporting Standard (IFRS) issued by International
Accounting Standard Boards (IASB). More details in the Concept of Financial Accounting
Statements (SFAC) no. 8 consists of 2 sub topics, namely:
A. The Purpose of Financial Reporting
Based on SFAC No. 8 the main purpose of financial reporting in general is to provide
financial information regarding Entity Reporting from a company that is useful for investors &
creditors in decision making.
B. Qualitative characteristics of useful financial information
Fundamental qualitative characteristics
Relevance, Relevance financial information is capable of making a difference in the decisions
made by users. Financial information is capable of making a difference in decisions if it has
predictive value, confirmatory value, or both. Financial information has predictive value if it can
be used as an input to processes employed by users to predict future outcomes. Financial
information has confirmatory value if it provides feedback (confirms or changes) about previous
evaluations.
Faithful representation, General purpose financial reports represent economic phenomena in
words and numbers. To be useful, financial information must not only be relevance, it must also
represent faithfully the phenomena it purports to represent. Faithful representation means
representation of the substance of an economic phenomenon instead of representation of its legal
form only. A faithful representation seeks to maximize the underlying characteristics of
completeness, neutrality and freedom from error.

Enhancing qualitative characteristics


Comparability, Information about a reporting entity is more useful if it can be compared with a
similar information about other entities and with similar information about the same entity for
another period or another date. Comparability enables users to identify and understand
similarities in, and differences among, items.
Verifiability,Verifiability helps to assure users that information represents faithfully the
economic phenomena it purports to represent. Verifiability means that different knowledgeable
and independent observers could reach consensus, although not necessarily complete agreement,
that a particular depiction is a faithful representation.
Timeliness,Timeliness means that information is available to decision-makers in time to be
capable of influencing their decisions.
Understandability,Classifying, characteristic and presenting information clearly and concisely
makes it understandable. While some phenomena are inherently complex and cannot be made
easy to understand, to exclude such information would make financial reports incomplete and
potentially misleading. Financial reports are prepared for users who have a reasonable
knowledge of business and economic activities and who review and analysis the information
with diligence.
Question : Related to qualitative characteristics, what is meant by neutralon faithful
representation characteristic and what happens if the characteristics are not fulfilled?

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