Unit 2 The Qualitative Characteristics of Financial Information

Qualitative characteristics are the attributes that make information provided in financial statements useful to others.

The Framework splits qualitative characteristics into two cat-egories：

（a）Fundamental qualitative characteristics.

·relevance；

相關性

·faithful representation.

真實性

（b）Enhancing qualitative characteristics.

·comparability；

可比性

·verifiability；

可核性

·timeliness；

及時性

·understandability.

可理解性

2.1 Fundamental qualitative characteristics

2.1.1 Relevance

Only relevant information can be useful. Information is relevance if it has the ability to influence the economic decisions of users, and is provided in time to influence those decisions. Information that is relevant has predictive, or confirmatory value.

相關性是指信息具有影響使用者決策的能力。

相關信息具有預測價值和反饋價值。

·Predictive value enables users to evaluate or assess past, present or future events.

·Confirmatory value helps users to confirm or corrects past evaluations and assessments.

The relevance of information is affected by its nature and materiality.

信息的相關性也受其特性和重要性的影響。

Information is material if its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements.

如果財務報表上的信息遺漏或錯誤地列報影響報表使用者做出經濟決策，則該信息是重要信息。

In assessing whether or not an item is material, it is not only the value of the item which needs to be considered. The context is also important.

Example 2.1

If a statement of financial position shows non-current assets of $2 million and inventories of $30000, an error of $20000 in the depreciation calculations might not be regarded as material. However, an error of $20000 in the inventory valuation would be material. In other words, the total of which the error forms part must be considered.

Example 2.2

If a business has a $85000 balance on bank deposit account and a bank loan of $80000, it will be a material misstatement if these two amounts are displayed on the statement of financial position as ‘cash at bank$5000'. In other words, incorrect presentation may amount to material misstatement even if there is no monetary error.

2.1.2 Faithful Representation

If information is to represent faithfully the transactions and other events that it purports to represent, they must be accounted for and presented in accordance with their substance and economic reality, and not merely their legal form. This is known as‘substance over form'.

信息應當按照經濟實質進行列報，而不應當僅僅按照其法律形式。這就是“實質重于形式”。

To be a perfectly faithful representation, information must be complete, neutral and free from error.

（1）Completeness

To be understandable information must contain all the necessary descriptions and explanations.

可理解的信息應當包含所有的必要說明和解釋。

（2）Neutrality

Information must be neutral（i. e., free from bias）in the selection or presentation of financial information. This means that information must not be manipulated in any way in order to influence the decisions of users.

信息應當具有中立性。

（3）Free from Errors

正確無誤

Information must be free from error within the bounds of materiality. A material error or an omission can cause the financial statements to be false or misleading and thus unreliable and deficient in terms of their relevance. Free from error does not mean perfectly accurate in all respects. For example, where an estimate has been used the amount must be described clearly and accurately as being estimate.

2.2 Enhancing Qualitative Characteristics

Comparability, verifiability, timeliness and understandability are qualitative characteristics that enhance the usefulness of information which is relevant and faithfully represented.

2.2.1 Comparability

In order to make decisions, users need to compare information between entities and over a time period. The information from different entities is comparable if there is consistency in the accounting treatment of the economic events and transactions over time and in the disclosure of accounting policies.

An important implication of comparability is that users are informed of the accounting policies employed in preparation of the financial statements, any changes in those policies and the effects of such changes. Compliance with accounting standards, including the disclosure of the accounting policies used by the entity, helps to achieve comparability.

2.2.2 Verifiability

Verifiability can be direct or indirect. Direct verifiability means verifying an amount or other representation through direct observation（i.e., counting cash）. Indirect verification means checking the inputs to a model, formula or other technique and recalculation the outputs using the same methodology.

可核性是指信息可以直接驗證，如現金盤點；也可以間接核驗，通過模型、公式和其他技術手段加以計算。

2.2.3 Timeliness

Timeliness means having information available to decision makers in time to be capable of influencing their decisions. Generally, the older information becomes less useful.

If information is reported on a timely basis when not all aspects of the transaction are known, it may not be complete or free from error. Conversely, if every detail of a transaction is known, it may be too late to publish the information because it has become irrelevant. The overriding consideration is how best to satisfy the economic decisionmaking needs of the users.

經濟業務發展過程中，及時披露信息，可能導致信息不完整或出現偏差；反之，如果披露不及時，信息可能變得不相關。信息質量特性沖突矛盾時，優先考慮能夠滿足報表使用者做出經濟決策需求的質量特性。

2.2.4 Understandability

Understandability depends on：

可理解性取決于：

·The way in which information is presented.

·信息的列報方式。

·The capabilities of users.

·使用者理解信息的能力。

It is assumed that users：

·Have a reasonable knowledge of business and economic activities.

·Are willing to study the information provided with reasonable diligence.

2.3 Other Accounting Concepts

There are other accounting concepts which are useful in the preparation of financial statements.

2.3.1 Fair Presentation

Fair presentation relates to preparation of financial statements in accordance with applicable financial reporting standards, relevant laws and regulations.

公允的列示是指在編制財務報表時，應遵循適用的財務報告準則及相關的法律法規。

Disclosure of compliance with reporting standards should be disclosed in the financial statements. If there is less than full compliance, the extent of non-compliance should be disclosed and explained.

2.3.2 Consistency

It is assumed that the enterprise will apply the same accounting treatment and policies for similar transactions and events, and these policies and principles will be adopted from year to year.

企業不同時期發生的相似的交易或者事項，應采用一致的會計處理方法和政策。

For example, if the entity depreciates a building using the straight-line method; then all similar buildings will also be depreciated using the straight-line method. The same depreciation method is used from one accounting year to another. Application of consistency allows financial statements to be comparable.

2.3.3 The Business Entity Concept

會計主體原則

Financial statements always treat the business as a separate entity.

This principle means that the financial accounting information presented in the financial statements relates only to the activities of the business and not to those of the owner. From an accounting perspective the business is treated as being separate from its owners.

財務報表中的財務信息只能反映企業本身的生產經營活動，與所有者個人的經濟活動無關。