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Conceptual Framework 1. Two of the fundamental qualitative characteristics of accounting information as outlined in conceptual framework are ‘relevance’ and ‘representational faithfulness’. Provide a brief description of the meaning of these two characteristics. Do you think faithful representation is more important than relevance for accounting information?

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The fundamental qualitative characteristics identified in the New Zealand Framework are ‘relevance’ and ‘faithful representation’.
Relevance is a fundamental qualitative characteristic of financial reporting. Under the IASB Conceptual Framework, information is regarded as relevant if it is considered capable of making a difference to a decision being made by users of the financial statements. There are two main aspects to relevance. For information to be relevant it should have both predictive value and confirmatory value (or feedback value), the latter referring to information’s utility in confirming or correcting earlier expectations.
The other primary qualitative characteristic is ‘faithful representation’. According to the IASB Conceptual Framework, to be useful, financial information must not only represent relevant phenomena but must also faithfully represent the phenomena that it purports to represent. According to paragraph QC 12 of the IASB Conceptual Framework:
To be a perfectly faithful representation, a depiction would have three characteristics. It would be complete, neutral and free from error. Of course, perfection is seldom, if ever, achievable. The Board’s objective is to maximise those qualities to the extent possible.
In discussing the need for information to be relevant and faithfully represented, paragraph QC17 of the IASB Conceptual Framework states:
Information must be both relevant and faithfully represented…...

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