What is Reliability Principle GAAP With Explanation

In Accounting, Reliability means that information presented in Financial Statements and Financial Reports are trustable for all interested parties concerned. To do this, Financial Statements must be verified by Independent Qualified Auditors from a well reputable Chartered Firm. As a result, every party gains confidence and trust in information stated in the Financial Reports. Generally Accepted Accounting Principles(GAAP) requires Reliability of information presented in Financial Statement. For Example, if the Annual Reports are sent to Shareholders, then they accept and show trust in the results related to Dividend Income and their Invested Amounts.

Reliability And Objectivity Principle are interrelated with each other i.e., if the information is reliable then it means that it is unbiased and free from the influence of any other party that may affect the final decisions of the finalized Auditor’s reports and get benefits from these reports. For example, the owner may get benefit by influencing the report in order to show more profits to Users of Financial Statements and hence encourage investors to invest in the company.