Relevance is a fundamental concept in accounting that refers to the usefulness of financial information in helping users make informed economic decisions. Information is considered relevant if it can influence the decisions of investors, creditors, managers, or other stakeholders by helping them evaluate past, present, or future events.

For financial information to be relevant, it must possess predictive value, confirmatory value, or both:

• Predictive value helps users make forecasts about future performance or outcomes.

• Confirmatory value helps users confirm or adjust previous evaluations or expectations.

For example, a company’s current revenue trends or profit margins may help investors decide whether to buy or sell shares, while an updated expense report can help managers confirm budget accuracy.

Timeliness is also a key factor in relevance. Financial information must be available when needed to maintain its decision-making usefulness. Outdated or delayed data, even if accurate, may no longer be relevant.

In summary, relevance ensures that financial reports are meaningful, timely, and helpful in assessing a company’s financial position and future prospects. It is a core principle in financial reporting that supports transparency and effective decision-making across all levels of a business.