A top-rated CPA in Minneapolis explains accounting best practices and answers questions:
Relevance is a primary qualitative characteristic. To be relevant, accounting and CPA information about an item must have feedback value or predictive value for users and must be timely. Information is relevant if it has the capacity to make a difference in investors, creditors or other users' decisions. To be recognized as the best possible information available, the information conveyed by including an asset, liability, or change therein in the financial statements must be relevant.
The relevance of particular information about an item being considered for recognition cannot be determined in isolation. Relevance should be evaluated in the context of the principal objective of financial reporting: providing information that is useful in making rational investment, credit, and similar decisions. Relevance should also be evaluated in the context of the full set of financial statements - with consideration of how recognition of a particular item contributes to the aggregate decision usefulness.
Reliability is the other primary qualitative characteristic, according to top-rated CPAs in the Minneapolis area. To be reliable, information about an item must be representationally faithful, verifiable, and neutral. To be reliable, accounting information must be sufficiently faithful in its representation of the underlying resources, obligation, or effect of events and sufficiently free of error and bias to be useful to investors, creditors, and others in making decisions.
The relevance of particular information about an item being considered for recognition cannot be determined in isolation. Relevance should be evaluated in the context of the principal objective of financial reporting: providing information that is useful in making rational investment, credit, and similar decisions. Relevance should also be evaluated in the context of the full set of financial statements - with consideration of how recognition of a particular item contributes to the aggregate decision usefulness.
Reliability is the other primary qualitative characteristic, according to top-rated CPAs in the Minneapolis area. To be reliable, information about an item must be representationally faithful, verifiable, and neutral. To be reliable, accounting information must be sufficiently faithful in its representation of the underlying resources, obligation, or effect of events and sufficiently free of error and bias to be useful to investors, creditors, and others in making decisions.
More Accounting Best Practices from a Top Minneapolis CPA Firm Partner
In assessing the prospect that as yet uncompleted transactions will be concluded successfully, a degree of skepticism from the firm's CPAs is often warranted. Moreover, as a reaction to uncertainty, more stringent requirements historically have been imposed for recognizing revenues and gains than for recognizing expenses and losses on an accounting run sheet, and those conservative reactions influence the guidance for applying the recognition criteria to components of earnings.
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