What quality of information ensures it affects decision making?

Relevance is the quality of information that ensures it affects decision-making. In accounting and financial reporting, relevant information is capable of making a difference in the decisions made by users. This type of information has the potential to influence the outcomes of those decisions, providing insights that are pertinent to the specific circumstances at hand.

For instance, when evaluating investment opportunities, relevant information might include current financial performance metrics or market trends that can help an investor predict future profitability. If the data presented is not relevant to the decision being made, it can lead to misunderstandings or missed opportunities.

While understandability, faithful representation, and consistency are important qualities of accounting information, they serve different roles. Understandability makes information accessible to users, faithful representation ensures that the information accurately reflects what it purports to represent, and consistency allows for comparability over time; however, it is relevance that directly connects the information to the decision-making process.