Question 6Q - Intermediate Accounting (Kieso)

Question

What are the enhancing qualities of the qualitative characteristics? What is the role of enhancing qualities in the conceptual framework?

Step-by-Step Solution

Answer

Enhancing qualitative characteristics include: 

• Providing timely information.
• Providing information that is easily understandable.
• Information provided is verifiable.
• Available information is comparable in nature.

The role of enhancing qualities is it separates the more-useful information from the less-useful information.

Enhancing qualities of the qualitative characteristics

There are four enhancing qualitative characteristics as follows:

• Timeliness: The term timeliness means the presentation of the accounting information to its users on a regular basis so as to aid them in taking decisions.

 

• Understandability: Understandability denotes the method by which the financial information must be displayed in a way that is easily understandable by the reader.

 

• Verifiability: The term verifiability comprises that the information must be displayed in a way that it is verifiable by the independent accountants.

 

• Comparability: It indicates the qualitative characteristics that help users in recognizing and understanding the similarities and distinctions among items.

Role of enhancing qualities in the conceptual framework

Enhancing qualities are characteristics that are beneficial for the management and the investors for using the financial statements of the company in their decision-making process.

Thus, these qualities in a conceptual framework enhance the organization's fundamental characteristics. Moreover, these characteristics also provide extra benefit and usefulness in financial reporting information.