Qualitative Characteristics

A financial reporting framework determines how financial statements are prepared and what information they contain. Qualitative characteristics of accounting information are part of this framework, and are attributes that make the information in the financial statements useful to users.


The most important qualitative characteristics of financial information are understandability and usefulness.


In order for information in financial statements to be useful users must be able to understand it. It should be noted that the ability to understand the information depends on the characteristics of the user as well as the characteristics of the information, and so understandability must be judged in relation to a particular user.

Financial statements are prepared using accepted accounting principles such as comparability and consistency.


One of the most useful aspects of financial statements is the ability the user has to compare information over time and against financial statements of other businesses.


Consistency is closely related to comparability. For accounting information to be comparable it must be presented in a consistent manner both over time, within the business, and between businesses.


The information provided must be useful for making decisions. Two of the most important qualitative characteristics relating to usefulness are relevance and reliability.


To have relevance, accounting information must help users evaluate the outcomes of past, present or future events or it must confirm or correct their past evaluations.


Information must be reliable to be useful. This means that it must be free from material error and bias, and faithfully represent what it purports to represent.

Last modified January 7th, 2020 by Michael Brown

About the Author

Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.

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