Timeliness of Accounting Information
Timeliness principle in accounting refers to the need for accounting information to be presented to the users in time to fulfill their decision making needs.
Timeliness of accounting information is highly desirable since information that is presented timely is generally more relevant to users while conversely, delay in provision of information tends to render it less relevant to the decision making needs of the users. Timeliness principle is therefore closely related to the relevance principle.
Timeliness is important to protect the users of accounting information from basing their decisions on outdated information. Imagine the problem that could arise if a company was to issue its financial statements to the public after 12 months of the accounting period. The users of the financial statements, such as potential investors, would probably find it hard to assess whether the present financial circumstances of the company have changed drastically from those reflected in the financial statements.
Users of accounting information must be provided financial statements on a timely basis to ensure that their financial decisions are based on up to date information. This can be achieved by reporting the financial performance of companies with sufficient regularity (e.g. quarterly, half yearly or annual) depending on the size and complexity of the business operations. Unreasonable delay in reporting accounting information to users must also be avoided.
In several jurisdictions, regulatory authorities (e.g. stock exchange commission) tend to impose restrictions on the maximum number of days that companies may take to issue financial statements to the public.
Timeliness of accounting information is also emphasized in IAS 10 Events After the Reporting Period which requires entities to report all significant post balance sheet events that occur up to the date when the financial statements are authorized for issue. This ensures that users are made aware of any material transactions and events that occur after the reporting period when the financial statements are being issued rather than having to wait for the next set of financial statements for such information.
Timeliness Vs Reliability - A Conflict
Whereas timely presentation of accounting information is highly desirable, it may conflict with the objective to present reliable information. This is because producing reliable and accurate information may take more time but the delay in provision of accounting information may make it less relevant to users. Therefore, it is necessary that an appropriate balance is achieved between the timeliness and reliability of accounting information.