i. Relevance
Financial information is considered relevant if it has the ability to influence the economic decisions of users by helping them evaluate past, present, or future events or confirming or correcting their past evaluations. Relevance is enhanced by including predictive and confirmatory value in financial statements, allowing users to make informed decisions. For instance, disclosing trends in revenue growth helps stakeholders anticipate future performance.

ii. Comparability
Comparability allows users to identify and understand similarities and differences between items of information. Financial information is more useful when it can be compared across different periods or with other entities, provided that it has been prepared using consistent accounting methods. Comparability enhances the decision-making process by enabling users to benchmark a company’s performance against industry standards or competitors.

iii. Understandability
Understandability means that financial information is presented clearly and concisely, making it accessible to users who have a reasonable knowledge of business and economic activities. Enhancing understandability involves classifying, characterizing, and presenting information in a way that facilitates comprehension, while complex information that is material should still be included as its omission could mislead users.

iv. Faithful Representation
Faithful representation implies that financial information accurately reflects the real-world economic substance of transactions, events, and conditions. For information to be considered faithfully represented, it must be complete, neutral, and free from material error. This characteristic ensures that the information presented in financial statements provides a true and fair view of the entity’s financial position and performance, allowing for better decision-making.

These qualitative characteristics collectively make financial statements more useful by ensuring that the information provided is relevant, comparable, understandable, and faithfully represents the financial reality of the entity.