The Financial Accounting Standards Board, which sets the rules for the reporting of financial results by domestic companies, says that for accounting information to be useful it has to meet certain criteria. The most important of these are what it calls the primary characteristics -- relevance and reliability. The board also identifies comparability and consistency as secondary characteristics that accounting information should display.
Relevance and Reliability
For information to be relevant in the accounting sense, it must be capable of affecting decision-making -- meaning it can make a difference in how someone plans for the future or reacts to the past. That "someone" can be in the company itself, or an outsider such as an investor and regulator. Relevant information also must be received in time for it to be useful in making decisions. Meanwhile, reliable accounting information is material that can be verified, that accurately describes what it claims to represent, and that does not change depending on one's point of view.
Comparability and Consistency
Comparability and consistency are closely linked -- so much so that the standards board now puts them in the same "bubble" on its flowchart of accounting characteristics. Comparability of accounting information means the information can be used to make comparisons between different companies and different events. A key reason why all companies have to adhere to the same accounting standards is for comparability's sake. Consistency refers to comparability over time: Companies should maintain consistent accounting practices so that results from one period can be compared to those of another period.