FNST - Four Primary Characteristics (IASB Framework)

Morpheus1980 Registered Posts: 120 🎆 🐘 🎆
Hi there. Just been looking at a few FNST related threads in preparation for the exam next week.

One thing that cropped up in a previous thread was that the four primary characteristics outlined in the Framework have recently changed. The ones that are referred to in the Kaplan Pocket Notes are Relevance, Reliability, Understandability and Comparability but can anyone confirm if these have since been updated? Thank you!

Oh and has anyone ever been asked a question in an exam on IAS 20? I know I shouldn't question-spot but this standard isn't even explained in the pocket notes and the thought of learning another yet standard makes my tiny brain want to implode!


  • Steve Collings
    Steve Collings Registered Posts: 997

    The Conceptual Framework has been subjected to recent change, but I think the impact would be minimal for the purposes of FNST. However, there are two 'fundamental' qualitative characteristics and four 'enhancing' qualitative characteristics.

    Fundamental Characteristics
    Financial information must be:
    - relevant: the information is capable of making a difference in the decisions made by users.
    - faithful in its presentation: the information is complete, neutral and free from error.

    Enhancing Characteristics
    Financial information is enhanced when it is:
    - comparable: the user can compare financial information from one company to another or from one period to the next.
    - verifiable: information in the financial statements can be substantiated.
    - timely: financial information is more useful when it is prepared on a timely basis (though sometimes, long delays may also be needed, for example due to seasonal peaks/troughs).
    - understandable: information is presented should be understandable and presented in a manner that users can understand.

    There is also a 'sub-section' of relevance which relates to materiality. An item is material if the financial information's omission or misstatement will cause the user to arrive at a wrong conclusion.

    IAS 20 questions on government grants/govt assistance could potentially (and I emphasise the word 'potentially') ask you about capital and/or revenue based grants or when a grant can be recognised (i.e. when the receiving company has complied with the conditions for its receipt). I would advise you to look at the recognition and measurement criterion also for:

    Capital based grants (i.e. debit non-current asset, credit deferred income). Release to the income statement over the life of the asset to which it relates (i.e. to match the grant income with the depreciation charge).

    Revenue based grants: recognise in income statement to match the grant against the expenses to which it relates.

    Hope that helps (but avoid question spotting please ;)

    Good luck

  • Morpheus1980
    Morpheus1980 Registered Posts: 120 🎆 🐘 🎆
    Hee hee, I consider myself told on the question spotting! *slaps wrist*

    Thank you so much for your advice on the fundamental and enhancing characteristics. A lot to take in, but invaluable to me in order to put my mind at rest!
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