Relevance Principle
The requirement that financial information must be capable of influencing user decisions by having predictive or confirmatory value to be useful.
Relevance Principle
The accounting principle requiring financial information to be capable of making a difference in users’ decisions by having predictive or confirmatory value.
For example, a technology company’s disclosure of R&D expenditures is relevant information for investors assessing future growth potential, as these investments today may indicate new product development for tomorrow.
Relevance is one of the primary qualitative characteristics of useful financial information. Relevant information helps users evaluate past events, present conditions, and future prospects, even if it sometimes requires estimates or forward-looking statements that may be less precise than historical data.