Which of the following actions best describes the qualitative characteristic "relevance"?
A)The financial report of KMC Ltd was audited by one of the Big 4 four accounting firms.
B)DGC limited provides quarterly financial reports.
C)MCB Ltd and DGC Ltd both use accelerated depreciation method.
D)GEP Ltd did not revalue its intangible assets because it was difficult to obtain the fair value of the assets.
E)None of the given answers.

Question

Quizplus · Accepted Answer

The qualitative characteristic "relevance" in the context of financial reporting refers to the capacity of the information provided to make a difference in the decisions made by users. Relevant information is capable of influencing the economic decisions of users by helping them evaluate past, present, or future events or confirming, or correcting their past evaluations.
Looking at the options provided:
1. The financial report of KMC Ltd was audited by one of the Big 4 four accounting firms.
   - This action relates more to the reliability and credibility of the financial reports rather than their relevance.
2. DGC limited provides quarterly financial reports.
   - Providing quarterly financial reports could be considered relevant as it offers timely information that could influence decision-making. This is the closest option to representing relevance, as more frequent reporting can help users make informed decisions in a timely manner.
3. MCB Ltd and DGC Ltd both use accelerated depreciation method.
   - The use of a particular depreciation method does not directly speak to the relevance of the information. It is more about the consistency and the method of accounting for assets.
4. GEP Ltd did not revalue its intangible assets because it was difficult to obtain the fair value of the assets.
   - This action does not necessarily relate to relevance. It may be more about the reliability and practicability of the valuation.
5. None of the given answers.
   - This option suggests that none of the other options correctly describe the qualitative characteristic of relevance.
Based on the above analysis, the action that best describes the qualitative characteristic "relevance" is option 2: DGC limited provides quarterly financial reports. This is because timely information is a key aspect of relevance, and quarterly reports can provide current information that may affect decision-making processes.

Which of the Following Actions Best Describes the Qualitative Characteristic