• relevance
• reliability
• comparability
• consistency

Overall the cost/benefit quality of information states that the benefits of accounting and reporting should exceed the cost. It makes no sense to gather, record, process, publish, and analyze information if it costs more to do that than the output is worth.

The primary information qualities are relevance and reliability.

All information is relevant to the original record of the transaction. All financial transactions should be recorded, even the purchase of a postage stamp. At the same time, that level of detail is not needed to present meaningful information in financial statements. For a financial statement presentation, the relevant information is an accurate summation of activities that is timely and has predictive value. Management can also use that information as feedback to analyze business activity.

The information presented must be reliable, that is, objective and verifiable. When GAAP is not observed, the reliability of the information becomes increasingly suspect. Offering the financial data to outside scrutiny, as in an audit, can enhance reliability.

The two secondary qualitative aspects are comparability and consistency.

Comparability means that business activities can be matched, that revenue for one business is the same as revenue for another.

Consistency requires that activities be treated the same over time. Business and external forces can cause the treatment of certain items to vary over time. Recent bad faith charges have often fixated on charges of inconsistency. For this reason, the
concept of consistency is receiving greater emphasis. Every business has wide discretion under general GAAP guidelines to treat certain transactions differently. For example, a business can chose different depreciation strategies or ways to account for marketing expenses. Booking full contract income after delivering a beta product is an example on the revenue side.

Within the range of discretion, the company should use the same treatment year after year. Changing the depreciation percentages or amortizing marketing expenses can cause income to seem greater than it actually is. If an error is discovered, the consistency hobgoblin cannot shield the need to correct the error. If it becomes necessary to change the method or the rates being charged, then the financial statements must show a note for that period. The note must state why the change was made and what effect it has on the results.

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