The FASB's and IASB'S qualitative characteristics describe the attributes that enhance the usefulness of financing reporting information. What are they?

QUALITATIVE CHARACTERISTICS OF FINANCIAL REPORTING INFORMATION

The qualitative characteristics describe the attributes that enhance the usefulness of financing
reporting information. The FASB's conceptual framework sets forth the following qualitative
characteristics:

1 . Relevance refers to information that can make a difference in a resource allocation decision by helping users to form predictions about the outcomes of future events and to confirm or correct prior information or expectations. Receiving information in a timely manner
(referred to as timeliness) so that it can influence decisions is an aspect of relevance.

2 . Reliability refers to the faithfulness with which accounting information represents what it
purports to represent and the extent to which the information is both verifiable by independent
measurers and neutral with respect to the interest of a particular user group.

3 . Comparability refers to financial reporting that treats similar items the same way and different items differently. Consistency refers to financial reporting that treats an item the
same way over time.

4 . Materiality envisions that the nature of the information is relevant and that its effect is
large enough to influence a decision. As standard setters make decisions about financial reporting standards, they consider the costs and benefits of those standards. They assess whether the benefits to users of financial reports from a particular financial reporting requirement exceed the costs of providing the information.

The IASB identifies understandability, relevance, reliability, and comparability as the
qualitative attributes of accounting information. Relevance, reliability, and comparability
appear as qualitative characteristics in the conceptual frameworks of both standard-setting
bodies. Understandability refers to the attribute that users of financial reports will perceive
the significance of a reported item to their decisions. Such perception involves understanding
the economic effects of a firm's actions and the measurement and reporting of those economic effects in the financial reports. Understandability is an implicit aspect of relevance in the qualitative characteristics set forth in the FASB's conceptual framework.

The joint efforts of the FASB and the IASB to set forth qualitative characteristics of
financial reporting information have led to the following tentative framework:

Fundamental Qualitative Characteristics

1 . Relevance
2 . Faithful representation

Enhancing Qualitative Characteristics

1 . Comparability
2 . Verifiability
3 . Timeliness
4 . Understandability

Pervasive Constraints

1 . Materiality
2 . Cost

These qualitative characteristics are similar to those in the existing conceptual frameworks
of the FASB and the IASB. However, the proposals would distinguish among the fundamental, enhancing, and constraining attributes, providing standard-setters with a framework for making trade-offs in setting particular reporting standards.