Fasb Joint Review Paper

The IASB/FASB joint review conceptual framework states that there are two fundamental characteristics which are relevance and faithful representation and in addition there are four enhancing characteristics which are timeliness, verifiable, comparable and understandability which enhance the decision usefulness of financial information. For information content to be relevant it must have the ability to influence the economic decisions of users and help users to evaluate or assess past, present or future events which is known as predictive value. It also could help users to confirm their past evaluations which are known as confirmatory value. Another fundamental qualitative characteristic is faithful representation; it should reflect the commercial
substance of transactions. Some important elements which link to faithful representation is that it should be free from material error, the transactions should be recorded accurately. Information must also be complete by going through a materiality test and neutral by not being bias.
For the enhancing characteristics the financial information also needs to be understandable and comparable over time and between companies. For it to be understandable it should be understood by a user who has reasonable knowledge of business activities and accounting and someone who has the willingness to study the information with reasonable carefulness. Information should be presented clearly and concisely. This does not mean that if the information which is relevant but is not included because of it being too complex for the users. The relevant complex information should also be included as the relevance of information would be complete.
Comparability refers to information gained from comparing with similar companies in the industry to find differences and comparing information in the business at different periods.