Which of the following best describes the term 'relevance' in the context of financial information?

In the context of financial information, 'relevance' refers to the ability of that information to influence the decisions made by users. This means that for financial information to be considered relevant, it should have the capability to affect the economic decisions of those who rely on it, such as investors, creditors, and management. Relevant information helps users assess past, present, or future events, which is crucial for effective decision-making.

While aspects like being current, understandable, or verifiable may contribute to the overall quality of financial information, they do not precisely define its relevance. Timeliness (current information), clarity (easily understandable), and accuracy (verified information) are important characteristics that enhance usefulness but do not directly encapsulate the core concept of relevance within the financial reporting framework. Relevance specifically emphasizes the importance of information's impact on decisions, making it a foundational aspect of effective financial reporting.