Which of the following best describes 'useful information' in the context of a financial plan?

• A. Information that is only historical and not forward-looking.
• B. Information that is based solely on estimates and assumptions.
• C. Information that is relevant and faithfully represents what it purports to represent.
• D. Information that is complex and difficult to understand.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of 'useful information' in financial accounting. Useful information is defined as information that helps users make decisions. It must possess two fundamental qualities: relevance and faithful representation.
2. Step 2: Relevance means the information should be capable of influencing decisions by helping users predict future outcomes or confirm past decisions. It should be timely and applicable to the decision-making process.
3. Step 3: Faithful representation means the information should accurately depict the economic phenomena it is intended to represent. It should be complete, neutral, and free from error.
4. Step 4: Analyze the options provided in the problem. Historical information alone is not forward-looking and may lack relevance. Information based solely on estimates and assumptions may lack faithful representation. Complex and difficult-to-understand information may not be useful for decision-making.
5. Step 5: Conclude that the correct description of 'useful information' in the context of a financial plan is: 'Information that is relevant and faithfully represents what it purports to represent.' This aligns with the fundamental qualities of useful financial information.