Professional Documents
Culture Documents
Faithful Representation
The financial information in the financial reports should represent what it purports to represent. Meaning,
it should show what really are present and what really happened, as the case may be.
There are three characteristics of faithful representation: 1. Completeness (adequate or full disclosure of
all necessary information), 2. Neutrality (fairness and freedom from bias), and 3. Free from error (no
inaccuracies and omissions).
income is compared for the years 2012, 2013, and 2014. Comparability of information across
entities enables analysis of similarities and differences between different companies.
Verifiability
Verifiability helps to assure users that information represents faithfully what it purports to represent.
Financial information is supported by evidence and independent individuals can check them to see
whether such information is faithfully represented. In other words, information is verifiable if it can be
audited.
Timeliness
Timeliness means providing information to decision-makers in time to be capable of influencing their
decisions. It shouldn't be significantly delayed or else it will be of little or no value.
Understandability
Understandability requires financial information to be understandable or comprehensible to users with
reasonable knowledge of business and economic activities. To be understandable, information should be
presented clearly and concisely. However, it is improper to exclude complex items just to make the
reports simple and understandable.