(c)

The examples of how HKAS16 Property, Plant and Equipment apply the qualitative
characteristics of relevance, faithful representation, comparability and
understandability in the Conceptual Framework For Financial Reporting.
For relevance, it means that the information influences the economic decisions of the
users and is therefore relevant to their needs. According to HKAS16, property, plant
and equipment (PPE) should be recognized if there is probable future income to earn
and the cost should be recognized reliably. The purchase price, directly attributable
cost and dismantling cost are included in the cost of PPE as they get the PPE ready for
its intended use. The other costs should be recognized as expenses as the PPE have
been already got ready for its intended use before these costs incurred. The way of
classifying the related costs of PPE into expense or the cost of PPE will affect the
initial amount of PPE, and it will affect the decision-making of statement users, for
example, investment.
For faithful representation, it means that information presented in the financial
statements should faithfully represent the transaction and events that occur during a
period. We can separate this concept into three parts. The first one will be
completeness, it requires all necessary information to be clearly presented in the
financial statement with clear description and explanations. For HKAS16, we follow
the same rule and provide clear description and explanations for relevant incidents,
such as revaluation of PPE, it should be clearly presented. The second one will be
neutrality, it means presenting financial information without bias in selection. For
HKAS16, it mentioned that revaluation should be done at regular interval no matter
its value increase or decrease if the companies apply revaluation model, there are no
bias to select what information that they want to present or omit. The last one will be
free from error, it means that no error in preparing the financial statement which is
applicable for the whole accounting system, including HKAS16.
For understandability, it means that the transactions and events must be accounted for
and presented as easily understandable for users who have reasonable knowledge,
willing to study and with reasonable diligence. Also, complex matters should not be
excluded. According to HKAS16, there is a united and well-organized structure
format for companies to present their financial information of PPE clearly and they
will follow the required structure, so the statement will be easily understandable for
users.
For comparability, it requires that the statement of one company can compare with its
previous statements and the statement of other companies. According to HKAS16, the
model of valuating the amount of PPE should be consistent, so the users can compare
a companys financial statements through time to identify trends. Also, users can
compare it with other entities statements which apply the same model, to evaluate
their relative financial position, performance and changes in financial position.
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