Accounting for something in accordance with its legal form, instead of its economic substance, does not result in a faithful representation.
- accounting for something in accordance with its legal form (even with appropriate disclosures) cannot result in a faithful representation if the economic substance of the item is different; and
- substance over form is an aspect of reliability.
...continue reading "Substance of contractual rights and contractual obligations"
What are more qualitative characteristics that enhance the usefulness of information that already qualifies as relevant and providing a faithful representation?
The enhancing qualitative characteristics may also help determine which of two ways should be used to depict a phenomenon if both are considered to provide equally relevant information and an equally faithful representation of the substance of the financial outcome of transactions in a business model.
...continue reading "More details to present Useful Financial Information"
Or more formally: Qualitative Characteristics of Useful Financial Information
What types of information are useful to users for making decisions about the reporting entity using the general purpose financial report compiled by the reporting entity. And equally important what are the cost constraints on the reporting entity's ability to provide useful financial information.
Some information will be more important than other information and some more important information will be easily maintained, collected and reported and other more important information will be expensive to maintain, collect and report, the question being when it is too expensive to maintain, collect and report.
...continue reading "What is Useful Financial Information?"