Qualitative Characteristics of Financial Information
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(a) Discuss the information needs of users in terms of the qualitative characteristics of financial information.
(b) Critically evaluate how financial information can meet both investor and stewardship needs.
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Solution Summary
This solution of 841 words discusses the information needs of users in financial information and also gives recommendations how financial information can meet both investor and stewardship needs. References used are included.
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Management, creditors, investors, and government regulatory agencies use financial information and the information contained depends largely on the nature of a business, and the purposes a user is seeking. Financial information provides a snapshot of a company's performance over a specific period, and should adhere to a uniform set of rules called general accepted accounting principles (GAAP), and principles established by an independent agency, the Financial Accounting Standard Board (FASB). There are different aspects of business financial activities that different groups of users are interested. Although the information provided is useful to decision makers, there is data it omits such as, market demand factors, technological factors, government regulations, competitor actions, etc. all can dramatically affect a company's bottom line (ASB, 1999).
A company's financial position includes the economic resources it controls, the financial structure, liquidity and solvency, the risk profile and management approach, and most important, the capacity to adapt to an every changing environment in which it operates. Financial information plays a vital role for a company in today's global environment. Ensuring information is useful, relevant ((having the ability to influence decisions of users and in a timely manner); reliable (information can be depended upon by users to reflect what is believed to be accurate or representative); ...
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