Define: Understandability

UK Accounting Glossary

Definition: Understandability

Quick Summary of Understandability

Qualitative characteristic of financial statements, understandable by users.

What is the dictionary definition of Understandability?

Dictionary Definition

Understandability is the principle that the financial information provided by a company should be such that it’s significance is capable of being perceived by a person with a reasonable knowledge of accounting and business and a willingness to study it with reasonable diligence.

The information provided should not leave out anything material, but should also not be so comprehensive in nature that it obscures any main points of significance.

This concept is defined in S.2 of the Financial Reporting Standard Applicable in the UK and Republic of Ireland.

The concept is also recognised in the International Accounting Standards Board’s (IASB) Conceptual Framework for Financial Reporting.


Full Definition of Understandability


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Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Understandability. Payroll & Accounting Heaven Ltd. November 17, 2019
Chicago Manual of Style (CMS):
Understandability. Payroll & Accounting Heaven Ltd. (accessed: November 17, 2019).
American Psychological Association (APA):
Understandability. Retrieved November 17, 2019, from website:

Definition Sources

Definitions for Understandability are sourced/syndicated from:

This glossary post was last updated: 23rd December 2018.