A tradeoff between enhancing qualitative characteristics often occurs. For example, when a company records sales revenue, it is required to simultaneously estimate and record an expense for potential bad debts (uncollectible accounts). Including this estimated expense is considered to represent the economic event faithfully and to provide relevant information about the net profits for the accounting period. Th e information is timely and understandable; but because bad debts may not be known with certainty until a later period, inclusion of this estimated expense involves a sacrifice of verifiability. The bad debt expense is simply an estimate. It is apparent that it is not always possible to simultaneously fulfill all qualitative characteristics.

Companies are most likely to make tradeoff s between which of the following when preparing financial reports?

A. Relevance and materiality.

B. Timeliness and verifiability.

C. Relevance and faithful representation.