For each of the following scenarios, determine which characteristic of quality i

Question

For each of the following scenarios, determine which characteristic of quality information is missing. In addition, determine whether or not the information would still be considered useful according to Phase A of the Conceptual Framework project.

1. When performing its analysis for impairment, Hill Entity’s CFO took an overly aggressive and unreasonably optimistic position and thus avoided a major impairment loss on the books.

Neutrality

2. Without notifying users of the financial statements, Ifond Entity chose to report its cost of goods sold using the FIFO method for the current year, although it used the LIFO method in the previous year. The numbers for the previous year were not updated to reflect the change.

Completeness

3. In its financial statements, Jarid Entity provides information about its machinery. This information cannot be used to predict future outcomes or confirm previous evaluations, but Jarid Entity believes it will help users of the financial statements better understand its operations.

Relevance

Explanation / Answer

1. Relevance and reliability.

Yes it would be considered useful

2. Comparability and consistency

Yes it would be considered useful

3. Understandability. Yes it would be considered useful

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