The demand-side: Fundamental qualitative characteristics

Let's think about the food business. Now that we know the customer, we would have to ask ourselves what they value? What is important to them in the restaurant?

Think about it: Would McDonald's use the same spices in Japan, Turkey, or South Africa?

The same goes for accounting; we need to customize our reports to the users. We have a general idea of the type of information that would be important. The next question that we need to answer is what characteristics the information needs to possess to be helpful. Two fundamental qualitative features that must be present are relevance and representational faithfulness.

In your own words, please explain these two fundamental qualitative characteristics as they relate to entitys financial information. Use detailed examples to supplement your explanations.

*Hint: Start by reading the definition of each characteristic and ensure to address each component of the definition.