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Acc Theory Assignment

Acc theory assignment

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Sanzida Rahman Asha
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32 views3 pages

Acc Theory Assignment

Acc theory assignment

Uploaded by

Sanzida Rahman Asha
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Cover page

Name : Sanzida Rahman

Roll: 2741

Batch:73A

Registration number: Wub 04/23/73/2741

Wub email : 0423732741@Student.wub.edu.bd

Course code: (ACC 6006 )

Course name : Accounting Theory

1
Assignment

1. Explain the Qualitative Characteristics of Accounting information in


accordance with FASB's conceptual framework?

Ans: The Financial Accounting Standards Board (FASB) conceptual framework


outlines qualitative characteristics that financial accounting information should
possess to be useful to users. These characteristics help ensure that financial reporting
is relevant, reliable, comparable, and understandable. The qualitative characteristics
are divided into two main categories: fundamental characteristics and enhancing
characteristics.


1. Relevance: Information is relevant if it is capable of making a difference in the
decisions made by users. To be relevant, information must be timely, have
predictive or feedback value, and be material. Timeliness ensures that
information is available to users in time to influence their decisions. Predictive
value helps users forecast future outcomes, while feedback value helps users
confirm or correct prior expectations .

2. Reliability: Reliability refers to the faithfulness of the information representation.


Reliable information is free from material error and bias and can be depended
upon by users to faithfully represent the economic phenomena it purports to
represent. Reliability is achieved through venerability, representational
faithfulness, and neutrality. Venerability means that different knowledgeable and
independent observers can reach consensus that the information faithfully
represents the underlying economic events. Representational faithfulness implies
that the information faithfully represents the economic phenomena it purports to
represent. Neutrality ensures that information is free from bias and not influenced
by the personal interests of those who prepare it.

3. Comparability: Comparability enables users to identify similarities and


differences between different entities or over time. Information is comparable

2
when it can be measured and reported in a consistent manner across different
entities and periods. Consistency is a key element of comparability, ensuring that
accounting principles are consistently applied over time within the same entity
and across entities.

4. Understand ability: Understand ability refers to the clarity and ease with which
users can comprehend the information presented in financial statements.
Financial information should be presented in a clear and concise manner, using
plain language and organized in a logical manner to facilitate understanding by
users who have a reasonable understanding of business and economic activities.

 Enhancing Characteristics:

1. Venerability: Venerability enhances the reliability of financial information by


enabling independent parties to reach a consensus on whether the information
faithfully represents the underlying economic events.

2. Timeliness: Timeliness ensures that financial information is available to users in


a timely manner, allowing them to make informed decisions based on current
information.

3. Understand ability: While also considered a fundamental characteristic,


understand ability is reiterated as an enhancing characteristic because it is crucial
for ensuring that financial information is accessible and comprehensible to users.

4. Comparability: Similarly, comparability is reiterated as an enhancing


characteristic because it enhances the usefulness of financial information by
enabling users to identify similarities and differences between different entities or
over time.

By possessing these qualitative characteristics, accounting information can better


serve the needs of users and contribute to more informed decision-making.

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