1.Understandability. The information must be readily understandable to users of the financial statements. This means that information must be clearly presented, with additional information supplied in the supporting footnotes as needed to assist in clarification.2.Relevance. The information must be relevant to the needs of the users, which is the case when the information influences the economic decisions of users. This may involve reporting particularly relevant information, or information whose omission or misstatement could influence the economic decisions of users.3.Reliability. The information must be free of material error and bias, and not misleading. Thus, the information should faithfully represent transactions and other events, reflect the underlying substance of events, and prudently represent estimates and uncertainties through proper disclosure.4.Comparability. The information must be comparable to the financial information presented for other accounting periods, so that users can identify trends in the performance and financial position of the reporting entity.

Characteristics of Financial Statements:

Financial statements are the formal records of the financial activities and performance of a business, organization, or individual. They provide valuable information about the financial health and position of an entity. Here are the key characteristics of financial statements:

1. Relevance:
Financial statements should be relevant and provide useful information to the users. They should help users in making informed decisions about the entity's financial position, performance, and cash flow. The information should be timely, reliable, and comparable.

2. Reliability:
The information presented in financial statements should be reliable and free from bias. It should be based on factual data and supported by evidence. The financial statements should be prepared in accordance with the applicable accounting standards and principles.

3. Understandability:
Financial statements should be presented in a clear and understandable manner. The information should be organized, well-structured, and free from complex jargon or technical language. The users should be able to comprehend and interpret the financial statements without any difficulty.

4. Comparability:
Financial statements should be comparable over time and across different entities. This means that the information presented should be consistent and standardized, allowing users to analyze and compare the financial performance and position of an entity with its competitors or industry benchmarks.

5. Consistency:
Financial statements should be prepared using consistent accounting policies and methods. This ensures that the financial information is presented in a uniform and consistent manner from one period to another. Any changes in accounting policies or methods should be disclosed and explained.

6. Materiality:
Financial statements should include material information that could influence the economic decisions of the users. Materiality refers to the significance or relevance of an item or event in the financial statements. Immaterial items need not be disclosed separately.

7. Completeness:
Financial statements should include all relevant and necessary information. They should provide a comprehensive picture of the entity's financial activities, including its assets, liabilities, equity, income, expenses, and cash flows. Omission of material information can mislead the users.

8. Going Concern Concept:
Financial statements are prepared on the assumption that the entity will continue its operations in the foreseeable future. This concept assumes that the entity will not liquidate or significantly curtail its operations. If there are any uncertainties regarding the entity's ability to continue as a going concern, it should be disclosed in the financial statements.

By adhering to these characteristics, financial statements become a reliable source of information for various stakeholders such as investors, creditors, management, and regulatory authorities.