The objective of financial reporting is to provide financial information to users. Examples of users:
Investors,
lenders,
regulators (like the SEC),
tax authorities (like the IRS),
stock market analysts, and
academic researchers.
Decision usefulness: If I am an investor, is the information useful in making an investment decision?
Relevance: Can the information predict and/or confirm something?
Materiality: How significant is the information in a user's decision making?
Faithful representation: The accounting measurement accurately reflects economic reality. Must be complete, neutral (objective), and free from error.
Conservatism: Requires more proof to record something good (e.g., a gain on the sale of a building) than for something bad (e.g., a loss from fire). [01]
Comparability: A financial statement user should be able to look at financial statements from two similar companies and expect the same accounting treatment for identical transactions occurring in both companies.
Verifiability: There is evidence to support the measurement and others would likely reach the same conclusion about accounting treatment if given the same evidence.
Timeliness: Financial information has to be available when a decision is being made.
Understandability: Can others comprehend the information?