13 CHARACTERISTICS OF FINANCIAL INFORMATION - CULTURE VOCABULARY - 2025

Some of the main characteristics of financial information are its reliability, veracity, objectivity, verifiability, sufficiency, understandability, stability, among others.

Financial information is all that information of an accounting or economic nature reflected in the financial statements, which are a structured representation of the financial situation and the performance of an entity, whether it is a private company or a public or governmental body.

Financial statements are a complete set of explanatory documents that generally contain:

-State of financial position

-Statement of income

-Statement of comprehensive income

-Statement of changes in Equity

-Cash flow statement

-Notes: summary of the most significant accounting policies and additional information.

The objective of financial statements is to provide financial information that is useful for investors, lenders and potential stakeholders who require it to make decisions, such as buying, selling, maintaining or modifying equity, obtaining financing, etc.

Beyond its structure and formal presentation, financial information must and must meet a series of characteristics to fulfill its fundamental purpose of usefulness, which are listed below.

Main characteristics of financial information

For financial information to be useful to the general user, it has to meet a series of characteristics, such as:

1- Reliability

The content should be consistent with the events that have happened within the company; that is to say, with its transactions and economic transformations.

The user must feel safe and confident with the information observed in the financial statements. This confidence is closely linked to other characteristics such as those described below.

2- Veracity

The financial statements must be a true transcription of the economic situation of the company.

Any attempt to modify, hide or overlap data undermines the veracity of the report and, therefore, against its reliability and usefulness, resulting in the danger of making incorrect decisions.

3- Objectivity

Financial information must be completely unbiased.

Any subjectivity, interpretation or manipulation of the data will create a distortion that could harm some sector of the company and / or benefit some other, by giving priority to the particular interests of any of the parties.

4- Verifiability

Although financial statements are a kind of summary that reflects the economic results of a company in a given period, this information has to be verifiable in its smallest details, so that the macro results of the period can be verified and validated.

5- Sufficiency

The financial statements have a “notes” section, in which all the information deemed relevant should be emptied so that investors can make the best decision about the company.

Do not skimp on details as irrelevant, as these could eventually make a significant difference in decision making.

6- Relevance

Although what is relevant or not in any content is something that can be highly subjective, the accountant must have sufficient knowledge of the financial situation of his company, in order to be able to provide the user with information that is really considered valuable for the taking of economic decisions.

In this regard, beyond the common sense and experience of the accountant, the Financial Reporting Standards (NIF) provide guidance on what could be of relative importance in each event or accounting item.

The correct formulation of predictions and their probable confirmations will depend on the relevance of the financial information.

7- Understandability

Financial information must be presented in such a way that it can be understood by the general user and not just by people steeped in the economic situation of the company.

Obviously, it is understood that if the general user has access to this information, it is because they have minimal knowledge and skills that will allow them to analyze and understand the financial statements and the economic activity of the business.

8- comparability

Comparability has to do with the ability for users to establish similarities, differences or comparisons between current and previous financial statements of the same entity, or between financial statements of different companies.

This is only possible if the financial statements obey the NIF standards, since it is the only way to "speak the same language", study the same parameters and be able to have uniform and standardized information in terms of criteria, which can make it comparable.

9- Opportunity

For financial information to be useful, it has to be timely; In other words, it must be prepared and delivered at the time it is required, so that users can analyze it and make the pertinent decisions at just the right time. Not before, not after.

To achieve this, it is necessary for the accountant to have all the information at hand, that it is up to date and organized, so that he can prepare the financial statements or part of them in a timely manner and with the most up-to-date data available to him.

10- Stability

It is necessary that all the qualitative characteristics of the financial statements achieve a balance among themselves, in order to meet their maximum profit objective.

Therefore, achieving the optimum point, instead of pursuing the maximum point of all these characteristics, is the best recommendation that can be made to the accountant responsible for preparing the financial information.

11- Belonging

Financial statements must meet the needs of users. These are seen in the need to be part of the reflection that a company presents, so the data and balance sheets of the financial statements must include lines dedicated to the market, information, trends and other concepts that affect the user

12- Regulated

The financial statements of any company are produced in a systematic way and must have a similar order, structure and content, endorsed by International Financial Reporting Standards (NIF), so that anyone, regardless of their geographical location, can read and interpret them in the same way.

13- Newspaper

The information in the financial statements must be presented with a stable frequency, normally being presented annually.

In general, in the case of listed companies, they present their financial statements in an intermediate manner. This means that they split the reports throughout the year. The reason is to generate confidence in investors and lenders by showing strength and liquidity.

References

1. Hernán Cardozo Cuenca. Single catalog of financial information for the solidarity sector. ECOE Editions.
2. United Nations (2003). Guidelines for accounting and financial information of small and medium-sized enterprises (DCPYMES). New York and Geneva.
3. Financial Information Standards (NIF) 2017. Mexican Institute of Public Accountants.
4. Characteristics of financial information. Recovered from contabilidadca.files.wordpress.com
5. Qualities of financial information. Government accounting harmonization. Recovered from democracycontributiva.wordpress.com
6. Germán Rivera (2013). Characteristics that financial information should have for marketers. Recovered from merca20.com
7. Characteristics of financial information. Recovered from sites.google.com.