You are listening to two accounting majors, both of whom are seniors. They are debating the merits of having relevant versus reliable accounting information for external decision making. One student states: “In my decision making, if given a choice between relevant and reliable accounting information, I would prefer to have relevant information.” The other student replies: “Nonsense! If you cannot rely on the information, then of what use is it?”

Required
Based on your knowledge of the FASB’s conceptual framework, define the qualitative characteristics of relevance and reliability. Include definitions of the ingredients of each. Which do you think is more important?