Understandability

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Understandability
This implies the expression, with clarity, of accounting information in such a way that it will be
understandable to users - who are generally assumed to have a reasonable knowledge of business
and economic activities
Relevance
This implies that, to be useful, accounting information must assist a user to form, confirm or
maybe revise a view - usually in the context of making a decision (e.g. should I invest, should I
lend money to this business? Should I work for this business?)
Consistency
This implies consistent treatment of similar items and application of accounting policies
Comparability
This implies the ability for users to be able to compare similar companies in the same industry
group and to make comparisons of performance over time. Much of the work that goes into
setting accounting standards is based around the need for comparability.
Reliability
This implies that the accounting information that is presented is truthful, accurate, complete
(nothing significant missed out) and capable of being verified (e.g. by a potential investor).
Objectivity
This implies that accounting information is prepared and reported in a "neutral" way. In other
words, it is not biased towards a particular user group or vested interest
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