II. Read the text to find out what sort of qualities accounting information should possess to be useful for users.

In order for accounting information to be considered useful it should possess certain qualities. These are: relevance, objectivity, timeliness, comparability, understandability.

These qualities may at times be in conflict with one another and some compromise between them may have to be made. The view as to what constitutes a satisfactory compromise may well vary between users or groups of users.

The most important quality is certainly relevance. Accounting information is said to be relevant if it has the potential to influence the decisions and judgements of users. Relevance is often regarded as the primary quality of accounting information as it embodies the basic idea that accounting exists in order to meet the needs of users. Accounting information which is irrelevant provides no benefits to users and does not, therefore, justify the costs of producing the information. It has been suggested that accounting information will be relevant if it helps users to predict the future and/or provides feedback to users which helps them evaluate the accuracy of earlier predictions.

Another important quality is objectivity. Objectivity, i.e. impartiality, can be divided into two elements: verifiability, and freedom from bias.

Verifiability suggests that the information produced can be independently observed or tested. This means that qualified accountants handling the same basic data but working independently would produce the same results.

Freedom from bias suggests that the information produced will not favour the interests of a particular group of users at the expense of another.

The higher the degree of objectivity the greater the confidence users are likely to have in the information produced.

Apart from relevance and objectivity accounting information should be timely in the sense that it should be produced 'reasonably soon' after the end of the accounting period to which it relates. If there is too long a delay, the accounting information produced will lose the relevance it otherwise might have had.

Accounting information should also be timely in the sense that the reporting intervals should be frequent enough to meet the user's needs. If the reporting interval is too long, information produced may only be available after the point in time when a decision should have been made.

When arriving at judgements or decisions users will often compare accounting information produced by different businesses. It is therefore useful if items or events common to different businesses are measured and presented in the same manner. Similarly, items or events occurring within the same business should be measured and presented in the same manner from one period to another. In other words accounting information should possess the quality of comparability.

And last but not least is understandability. Users will only be able to employ accounting information in a sensible way if they are able to understand it. This means that accounting information should be set out in a clear and logical manner and not be unnecessarily complicated.

Comments

relevance – доречність, значимість

to influence the decisions and judgements of users – впливати на рішення та міркування, думки користувачів

it embodies the basic idea – це втілює основну думку

in order to meet the needs of users – для того, щоб відповідати потребам користувача

irrelevant – недоречний

benefit – користь, прибуток;

to justify – виправдовувати, пояснювати, підтверджувати

feedback – зворотній зв’язок

to predict – передбачати

to evaluate – оцінювати

objectivity –об’єктивність

impartiality [mp:lt] – об’єктивність, безсторонність

a delay – затримка, зволікання

verifiability – можливість перевірити

bias [bas] – відхилення, систематична помилка, похибка

freedom from bias – неупередженість

to complicate – ускладнювати

III. Re-read the text to find out which of the following statements is correct.

1. If accounting information is irrelevant, it does not help users in making decisions and judgements.

2. Relevance is the primary quality of accounting information because accounting exists to meet the needs of users.

3. Qualified accountants working independently with the same basic data produce different results.

4. Accounting reports should be frequent enough to meet the user's needs.

5. It is not important if economic items or events are not presented in the same manner.

6. The quality of understandability suggests that accounting information should be set out in a clear and logical manner.

7. The desirable qualities of accounting information are never in conflict with one another.