What is one of the fundamental characteristics of useful financial information?

Relevance is a fundamental characteristic of useful financial information because it ensures that the information provided can influence the decisions made by its users. Relevant financial information has the ability to help users assess past, present, or future events or confirm or correct their past evaluations. This characteristic is essential for financial statements, as it enables investors, creditors, and other stakeholders to make informed decisions that add value to their understanding of an entity's financial position and performance.

When information meets the criterion of relevance, it typically addresses the specific needs of users, allowing them to make reasonable predictions or assessments based on that data. This often involves providing timely and pertinent information that reflects current conditions or forecasts future trends. Users of financial statements prioritize information that relates directly to their decision-making processes.

Other characteristics like comparability, verifiability, and understandability are also important for financial information. While comparability allows users to identify similarities and differences among entities, verifiability assists in ensuring that information faithfully represents what it purports to represent. Understandability ensures that information is presented clearly to all users. However, without relevance, the financial information may become less useful, as it would not effectively aid in making informed decisions.