The document discusses the key attributes and objectives of accounting information. It outlines that accounting information should be understandable, decision-useful, relevant, reliable, comparable, and consistent. Specifically, it defines that relevant information must be capable of making a difference, have predictive or feedback value, and be timely. Reliable information must be verifiable, faithfully represented, reasonably free from error and bias. Comparable information enables comparison across companies and time periods, while consistent use of accounting principles enhances usefulness over different reporting periods. The overall goal is to provide useful information to aid in decision making.

1. ATTRIBUTES OF ACCOUNTING

2. Hierarchy of Qualitative Information
Understandability
Decision Usefulness
Relevance
Predictive
Value
Feedback
Value
Timeliness
Reliability
Verifiability
Neutrality
Representational
Faithfulness
Comparability and Consistency

3. Objectives of Financial Information
• To provide useful, understandable information to users of financial statements for
decision making
• For present and potential investors and creditors and other users in making
rational investment, credit, and similar decisions
• To help present and potential investors and creditors and other users to assess the
amounts, timing, and uncertainty of prospective cash receipts
• To inform users about the
– economic resources of an enterprise;
– the claims to those resources (obligations);
– the effects of transactions, events, and
– circumstances that cause changes in resources and claims to
those resources

4. Objectives of Financial Information
• Decision usefulness
– the quality of being useful to decision making
• Understandability
– users must understand the information within the
context of the decision being made

5. Primary Qualities of Accounting
Information
• Relevance
– Definition: relating to the matter at hand
• Reliability
– Definition: the quality or state of being reliable;
and the extent to which an experiment, test, or
measuring procedure yields the same results on
repeated trials

6. Relevance
• Capable of making a difference in the decision
making of the user
• Must have predictive or feedback value
– Predicts or forecasts for users about the outcome of
events of a company
– Provides feedback value for users to confirm or
correct prior expectations of a company
• Must be presented in a timely manner
– Provides current information to users to help with
decision making

7. Reliability
• Must be verifiable
– Able to be proven; not subject to opinion
• Must be a faithful representation
– Agreement between the accounting numbers and
supporting documentation
• Must be reasonably free from error
– No mistakes or inaccuracies should be found in the
financial statements
• Must be reasonably free from bias; should be neutral
– Accounting information should not favor any groups or
companies but be a true and factual representation of a
company’s financial position.

8. Secondary Qualities of Accounting
Information
• Comparability
– Definition: The quality of information that enables users to
identify similarities in and differences between two sets of
economic phenomena.
• Consistency
– Definition: Conformity from period to period with unchanging
policies and procedures.
• Information about a particular enterprise gains greatly in
usefulness if it can be compared with similar information.

9. Comparability
• The purpose of comparison is to detect and
explain similarities and differences.
• Accounting information should be comparable
across different companies and over different
time periods.

10. Consistency
• Consistent use of accounting principles from
one accounting period to another enhances
the utility of financial statements to users.
• A quality of the relationship between two
accounting numbers

11. Questions for Understanding and
Discussion
• What is the primary objective of financial
accounting?
• Explain relevance and reliability of financial
statements.
• What are the components of relevant
information?
• What are the components of reliable
information?
• Why should financial statements be both
comparable and consistent?