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Question 10: Conceptually, interim financial statements can be described as emphasizing:
A. Timeliness over reliability.
B. Reliability over relevance.
C. Relevance over comparability.
D. Comparability over neutrality.
Correct Answer: A
Explanation:
Choice "a" is correct. Interim financial statements emphasize timeliness (an element of relevance) by
providing financial information based on actual performance to date and estimates prior to year end.
Information must be available when it is needed to be useful. Reliability is impeded by the extensive
use
of estimates; however, the lag until verifiability is obtained detracts from usefulness. SFAC 2 para. 56
Choice "b" is incorrect. Relevance (particularly timeliness) of information in interim financial
statements is
emphasized more than reliability. Reliability is impeded by the extensive use of estimates in interim
data.
Choice "c" is incorrect. Since comparability is a secondary quality of information, there should be no
need
to trade off comparability for relevance (a primary quality). Choice "d" is incorrect. Neutrality is an
element
of reliability (a primary quality of information. There should be NO need for a trade-off for
comparability
over neutrality.