1.

The new definition of materiality given by IASB explains that when the information is misstated
or omitting it on any report in the company could affect the users especially the primary users in
making economic decisions for the business entity. Any information that expected to influence
the users are considered material.
2. The factors that maybe considered in determining materiality are size and nature of the financial
information.
3. Faithful representation means that all reports in financial statements should be actual and
matched to what really happened in a specific transaction. We should record the exact amount,
item, and its effect to financial report so that it can be considered as faithfully represented.
4. The three ingredients in faithful representation are completeness, neutrality, and free from error.
When we say completeness, all necessary and relevant information should be included in the
report. To be faithfully represented, it is important that it is neutral which the information should
be free from bias. Lastly is free from error, error in reports can lead to irrelevant information and
information stated is not consider as faithfully represented.
5. When we say completeness of financial information, all necessary and relevant information
should be included in the report. Information that can affect and help the users understand and
make an economic decision for the entity should be stated or present on the report.
6. The standard of adequate disclosure is about the importance of stating clearly and relevant
information to financial report since this could help the primary users to make a decision for the
business entity.
7. Notes in financial statements is important when we talk about completeness of financial
information. Notes are the additional information to the accounts found in financial statements,
through this those accounts can be justifiable and can easily be explain and understand by the
users. Accounts having an additional information explaining more about the it can be considered
as complete.
8. To be faithfully represented, it is important that it is neutral which the information should be
free from bias. Neutrality is when you present a report that is free from personal opinion and
bias.
9. The concept of prudence is about how we should deal with uncertainties in making decisions
and measurement process in financial matter. This concept supports the concept of neutrality.
10. The concept of conservatism is somewhat related to prudence, it is also about the decision we
make for the entity. The concept states that when alternative exist, the alternative which has the
least affect on equity should be chosen. We should think carefully and balance every decision we
make.
11. Free from error is one of the ingredients of faithful representation. Error in reports can lead to
irrelevant information and information stated is not consider as faithfully represented. It is
important that we make sure that all information and transactions are recorded exactly and clear
to avoid error and to achieve faithful representation.
12. Measurement uncertainty happens when monetary amounts in financial report cannot be
directly report the only way to observed it through estimation. Having an estimation in financial
report can affect its faithfulness representation and the overall result especially when the level
of uncertainty in estimation is too high, but if it is explained clearly and accurately it cannot
affect the usefulness of the information.
13. The concept is refer to transaction recorded in financial statements that reflect their economic
substance rather than their legal form.
14. These characteristics are intended to increase the usefulness of financial information that is
relevant and faithfully represented.
15. Comparability, understandability, verifiability, and timeliness.
16. Comparability is one of the enhancing characteristics, through this user of financial information
can identify and compare the difference and similarities inside the entity or even two different
business entities outside the business. Using this concept, you should compare two same things
for you to point out the real difference and similarities. For example comparing the total income
of the business this year from last year.
17. Comparability has 2 kinds, comparability within the entity and between and across the entity.
Comparability is also known as horizontal comparability or intracomparability, this kind of
comparability allows the user to compare financial information inside the single entity only, by
using time or accounting period.
18. Comparability between and across the entity is also known as intercomparability or dimensional
comparability. This concept allows comparison between two different entities but still in the
same industry.
19. Consistency refers to the use of same accounting method from period to period within the
entity. This is important so we can easily compare financial information within the entity, change
from the accounting period may be considered but it should be clearly explained before the
change happened.
20. Comparability and consistency are different, but they are connected. Consistency refers to the
process used by the entity in financial information from period to period while comparability
refers to the process of comparing two or more companies in the same industry based on their
status. Consistency can help to achieve comparability.
21. Understandability requires that financial information must be comprehensive if it is to be most
useful. Information should be clearly stated and should be easily understand by the users, the
terminology used in the financial report should be simple so that the user can understand the
report. When the relevant and faithful represented information is not easily understand by the
user can be consider as useless.