Reliable information

Reliable information – While everybody agrees that financial reporting measurements should provide reliable information, there is no consensus as to what exactly reliability means. For example, views differ as to whether verifiability is an essential component of reliability. Reliable information

In measurement generally (as opposed to financial reporting specifically), repeat-ability is usually regarded as a key aspect of reliability. A measurement of a physical attribute is reliable if different people making the same measurement would all arrive at the same answer. Financial reporting measurements do not concern physical attributes, but the principle of repeat-ability could still be applied to them, though with greater difficulty. 100 people estimating the recoverable amount of a portfolio of debts, for example, might reasonably come up with 100 different answers. While this may seem an unpromising result, it should at least establish the range and popularity of possible measurements of the recoverable amount. Reliable information

Reliability implies not only that information is accurate, but that there is some reason why users should rely on it. This might be because the information has been verified by a third party or because it comes from a reliable source or for some other reason. Reliable and useful information should therefore be both accurate and have some additional characteristic that allows the user to place reliance on it. Perhaps trustworthiness would be an appropriate term for this characteristic.

A further important point about reliability is that, like relevance, it is subjective. Information that one person will accept as reliable will be rejected by another. It also depends heavily on context. Sources that would be accepted as reliable in one context would be rejected in another.

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One interpretation of the reliability test is that financial reporting information should reflect only independently verifiable data. However, it can be argued that no basis of measurement meets the reliability test expressed in quite this way.

Here measurements are treated as reliable if they are objective. The more objective a measurement is, the more likely it is that other persons making the same measurement on the same measurement basis would arrive at the same answer and the more likely it is to be verifiable.

Verifiability is a stronger test than audit-ability, because even subjective measurements can be audited.

But where financial reporting information is to be audited, the more verifiable it is, the greater the potential reliance that can be placed on the assurance process.

Reliable information

Reliable information

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