Fundamental qualitative characteristics
Relevant information is capable of making a difference to users’ decisions; materiality is an entity-specific aspect of relevance. Faithful representation depicts the substance of an economic phenomenon completely, neutrally and without error to the extent possible. Information must be both relevant and faithfully represented to be useful. Comparability, verifiability, timeliness and understandability enhance usefulness but cannot make irrelevant information useful.
Worked example
A material warranty obligation is relevant to a lender. A balanced, complete estimate based on supportable data is more faithfully representative than deliberately omitting it to make liabilities look lower.
Common mistake
Classifying comparability as fundamental, or assuming a precise number is useful even if it represents an irrelevant item.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |
