I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

 

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A neutral depiction is without bias in the selection or presentation of financial information. A neutral 

depiction is not slanted, weighted, emphasised, de-emphasised or otherwise manipulated to increase 

the probability that financial information will be received favourably or unfavourably by users.   

Neutrality is supported by the exercise of prudence. Prudence is the exercise of caution when making 

judgements under conditions of uncertainty. 

Free from error means there are no errors or omissions in the description of the phenomenon and the 

process used to produce the reported information has been selected and applied with no errors in the 

process. In this context free from error does not mean perfectly accurate in all respects. 

(Conceptual Framework for Financial Reporting 2018, paras. 2.12–2.18)  

3.2.1  Substance over form

 

This is a characteristic of faithful representation.  

For example, a business may have entered into a leasing agreement for some equipment. However, the 

terms are such that the business is really buying the equipment. The equipment should therefore be 

included in the statement of financial position as an asset of the business and the leasing agreement 

should be treated as a financing arrangement. 

3.3  Enhancing qualitative characteristics 

3.3.1 Comparability 

'

Comparability

. Comparability is the qualitative characteristic that enables users to identify and 

understand similarities in, and differences among, items.'  

(Conceptual Framework for Financial Reporting 2018, para. 2.25) 

'Information about a reporting entity is more useful if it can be compared with similar information about 

other entities and with similar information about the same entity for another period or date.'   

 

(Conceptual Framework for Financial Reporting 2018, para. 2.24) 

 

'Consistency, although related to comparability, is not the same. Consistency refers to the use of the 

same methods for the same items (ie consistency of treatment) either from period to period within a 

reporting entity or in a single period across entities.' 

(Conceptual Framework for Financial Reporting 2018, para. 2.26) 

The disclosure of accounting policies is particularly important here. Users must be able to distinguish 

between different accounting policies in order to be able to make a valid comparison of similar items in 

the accounts of different entities. 

Comparability is not the same as uniformity. Entities should change accounting policies if those policies 

become inappropriate.