The qualitative characteristics of financial report preparation Essay

The soft characteristics of pecuniary report preparation - set about ExampleThis essay discusses that qualitative characteristics influence the m onetary informations effect. The personars of the financial information entrust on the qualitative characteristics of the financial disputations for their decision making activities. The recogniseors use the financial statements as one of the tools for deciding whether to grant contributes or credit terms to the credit applicant. Financial statement indicating the family generated a receipts trend for the past two long time giveing persuade the creditors to grant the loans or credit applications. The last-place profit portion of the financial statements indicates the company will be able to pay its maturing loan and credit obligations on time. On the other hand, the creditors will be discouraged to approve the credit or loan application of a company having a net tone ending financial picture. The net loss financial picture in dicates a strong probability that the company may close shop in the contiguous few years. The credit or loan applicant may not be able to postdate with its duty to pay its loans or credits when the maturity dates crop up. In addition, the customers use the financial statements as one of the major tools for deciding whether to grant loans or credit terms to the credit applicant. The customers use the financial statements to determine if the company will stay long enough to supply their wants, needs, and caprices. A financial statement indicating a loss will persuade the client to start looking for other competitor suppliers. A net loss figure creates an impression on the minds of the customers that the company may not qualify as a going concern entity. A net profit ensures the customers that the company will provide the clients needs. Furthermore, the managers use the financial statements as one of the major tools for benchmarking their performance. The managers will have a passing performance regularize if the financial statements indicate the company generated net profits during the past year or years of proviso the needs of its clients. On the other hand, the manager will receive a failing performance grudge if the financial statements indicate the company generated a net loss for the past year or years of service. The managers need financial statements that obey with the qualitative characteristics standard. Also, the current and prospective investors use the financial statements as one of the major tools for deciding whether to grant loans or credit terms to the credit applicant. The current and prospective investors will be encouraged to invest their hard earned cash in the company, if the financial statements indicate the company generated profits for the past year or years of service. On the other hand, the current and prospective investors will be discouraged to invest in a company that generated a trend of net loss for the past year or years of o peration. The current and prospective investors need financial statements that comply with the qualitative characteristics standard. Based on the above discussion, the entities must resolve the threshold quality of materialityiv. Materiality is not prosperous to define and can be misunderstood. The financial information is material if the omission or misstatement could influence the economical decisions of the financial sta