The understandability concept states that the information contained in financial statements should be understandable to persons who have a reasonable understanding of business and economic conditions and are willing to study the information with reasonable diligence.

Question

Quizplus · Accepted Answer

The statement accurately reflects the concept of understandability in financial reporting, which emphasizes the importance of conveying information in a clear, concise, and comprehensible manner, but does not require or presume any particular level of financial expertise on the part of the intended users. The objective is to facilitate informed decision-making by enabling users to interpret and apply the information to their own circumstances.

The Understandability Concept States That the Information Contained in Financial