Study Guide: CFA Level 1

1) Primary qualities of useful accounting information:

- Relevance - Accounting information is relevant if it is capable of making a difference in a decision.

Relevant information has:
(a) Predictive value
(b) Feedback value
(c) Timeliness

- Reliability - Accounting information is reliable to the extent that users can depend on it to represent the economic conditions or events that it purports to represent.

Reliable information has:
(a) Verifiability
(b) Representational faithfulness
(c) Neutrality

2) Secondary qualities of useful accounting information:

Comparability - Accounting information that has been measured and reported in a similar manner for different enterprises is considered comparable.

Consistency - Accounting information is consistent when an entity applies the same accounting treatment to similar accountable events from period to period.

Accounting Qualities and Useful Information for Analysts
Here is how these qualities provide analysts with useful information:

Relevance- Relevant information is crucial in making the correct investment decision.