Relevance versus Faithful RepresentationYou are listening to two accounting majors, both of whom are seniors.They are debating the merits of having relevant versus faithfullyrepresented accounting information for external decision making. One student states, "In my decision making, if given a choice betweenrelevant and representationally faithful accounting information, I wouldprefer to have relevant information." The other student replies, "Nonsense! If you cannot rely on the information, then of what use is it?"Required: Based on your knowledge of the FASB's Conceptual Framework, define the qualitative characteristics of relevance and faithful representation.Include definitions of the ingredients of each. Which do you think ismore important?
Relevance versus Faithful Representation
You are listening to two accounting majors, both of whom are seniors.
They are debating the merits of having relevant versus faithfully
represented accounting information for external decision making. One
student states, "In my decision making, if given a choice between
relevant and representationally faithful accounting information, I would
prefer to have relevant information." The other student replies,
"Nonsense! If you cannot rely on the information, then of what use is it?"
Required:
Based on your knowledge of the FASB's Conceptual Framework, define
the qualitative characteristics of relevance and faithful representation.
Include definitions of the ingredients of each. Which do you think is
more important?
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