Completeness and Representational Faithfulness of Financial Statements

In the glossary of terms in Financial Accounting Standards Board (FASB) Statement 2, completeness is defined as the inclusion in reported information of everything material that is necessary for faithful representation of the relevant phenomena. Representational faithfulness is defined as correspondence between a measure or description and the phenomenon that it purports to represent. Completeness and representational faithfulness do not imply anything about the relevance of the particular attribute being measured. The concepts of completeness and representational faithfulness are useful tools for standard setters, and they help articulate the reasons for standards - especially why recognition in the financial statements, rather than just disclosure outside the statements, is needed. However, sound concepts are necessary tools but not sufficient for successful standard setting. The FASB's conceptual framework was both used and criticized in the Report of the American Accounting Association Committee on Accounting and Auditing Measurement.