The decisions made by users of financial statements demand that users estimated degree of ability of the enterprise to generate means. It has paramount value when determining possibility of the enterprise to achieve success in daily activity. Analyzing a financial position, productivity and cash flow of the enterprise, users can estimate ability of the enterprise to generate means.
Financial information is usually prepared for definite purposes and for use by certain groups. If the financial information prepared by the company does not meet these two requirements, this information is only the report of data and it cannot be used.
In order that financial information was useful to the user, he has to have access to information when information can be used for decision-making. Eventually usefulness of financial information decreases. If information represents any interest for decision-making, it has to be submitted before decision-making.
This principle assumes that the enterprise carries out activity without considerable changes in the volume of the operations, does not intend to make the decision on elimination or other decisions which could change significantly nature of activity to that is reflected in financial statements.
b. Expenses - reduction of an economic benefit for the reporting period in the form of an expenditure of means or reduction of cost of assets or increase in liabilities which is expressed in reduction of the capital of the company, but not as a result of distribution of means among shareholders. Definition of expenses assumes losses and other expenses which result from usual activity of the enterprise. The expenses resulting from usual activity of the enterprise include, for example, prime cost of the realized production, expenses on compensation and wear. Losses represent other articles which answer definition of expenses and can arise or not result from activity of the enterprise.
To be impartial, information has to reflect the main events most fully. Completeness means that all considerable information has to be reflected so that to provide understanding and not to mislead.
According to the principle of compliance financial information has to be related to the made decisions. Information has to influence decisions of users, helping them to estimate past and present activity of the enterprise, its situation and cash flow. In order that information was pertinent, it has to possess qualities of forecasting and feedback. Quality of forecasting helps users to expect an outcome of events. Information which confirms correctness or abnormality of forecasts of the user, possesses quality of feedback. Using these two characteristics of compliance, the user can form the decisions on the basis of financial information.