Qualitative characteristics of financial statements

According to the general financial calculations, the qualitative characteristics of financial statements, financial reports that are useful to the user should be there information. It can have four main qualitative characteristics. That is understandable, relevant, reliability and can be compare.

Underlying

The quality of important information in financial statements is an instant understandable feature by the users. For this purpose, the user is believe to have enough knowledge about the business and financial activities. Accounting and the desire to study the information with a fair dissatisfaction. However, critical information that should be include in financial statements. It cannot be issue keeping in mind that it is very difficult to understand the information by a particular user.

Relevant

In order to meet the needs of users in the decision-making process the information should be relevant. The relevant quality of information can affect economic decisions by helping to evaluate, support or improve. The results of their evaluation in past, present or future events. Role of information related to each other in predictive (hypothetical) and understanding (Confidential). Structural ownership structure and size make users advantageous when they try to predict the capabilities of the company using opportunities and react to the adverse situation. This same information plays the role of giving confirmation against the December predictions. For example how the expect financial structure of the company is made or the result of plan operations.

Financial condition and performance information in the past use to be use to predict future financial conditions. The performance and other items that are immediately use to attract users' attention. Such as dividends and wages, the price movements of securities and the ability to meet its commitment to the company. In order to keep predictive value, information is not necessarily in the form of predictive form. However, the ability to predict financial statements can be enhance with past transaction and event information. For example, the hypothetical value of the reports can be expand. If revenue accounts or companies are unusual, unusual, and rare, then publicly disclosed.

Reliability

The characteristics of financial reports and the third reliability are. Information must also be trust. If the information is misleading, credible and reliable to use as a real or honest rendering. The information is of a credibility standard or is likely to be present. Information may be related but if nature or not reliably, the use of such information may be potentially misleading.

5 Points for reliability

For example, The company is not eligible to accept the balance amount in the Balance Sheet. Although it may be appropriate to disclose the amount and circumstances of these claims.

1. The information
   Honest information should be describe with honest transactions and other events should be present or that reasonably can be expect to be serve. So for example, the balance sheet should describe honestly deals as well as other events in the form of assets, liabilities and equity of the company on the date of reporting that meets the criteria for recognition.


2. Substance out perform form
   If the information is intend for presenting with honest transactions and other events should be present, then the event should be note and present in accordance with their substance and economic reality and not just a form of law.


3. Neutrality of the information
   It should be direct to the needs and desires of a particular party. There should be no effort to present information that benefit some parties, while it would be detrimental to other parties who have an interest in the opposite.


4. Considerations healthy financial report preparation there are times when facing the uncertainty of events and circumstances, such as the billing accounts receivable which is doubtful, the approximate time of the benefits factory as well as tools, and the demands of warranties warranty that may arise. That kind of uncertainty is acknowledge by revealing substance as well as the rate and using the healthy consideration in the preparation of the financial statements. Considerations of prudence in the when doing element contains an estimate of the uncertainty, so that assets or income is not declare is too low. However, the use of the healthy consideration is not allow, for example, the establishment of a reserve of hidden or excessive stage and accidentally setting the earning assets or lower or recording an obligation or burden is higher, so that the financial report be not neutral, and therefore do not have a reliable quality.


5. Completeness of Information in the financial statements
   It must be complete in terms of materialize and the load. Deliberate action to not reveal results in information into incorrect or misleading and therefore unreliable and not perfect in terms of its relevance.

Comparable

the user should be able to compare the financial statements of the company between periods to identify the tendency of the position and financial performance. Users should also be compare between the company financial reports to evaluate the relative financial positions. Therefore, measurement and presentation of financial impact, transactions, and other similar events should be done consistently for the Corporation in question, between periods of the same company and for different companies.