Understandability is one of the qualitative characteristics of financial information, as outlined in the conceptual framework for financial reporting. Understandability refers to the extent to which financial information is presented in a clear and concise manner, and is understandable to users with a reasonable level of financial knowledge.

In order to be understandable, financial information must be presented in a way that is clear and concise, and is free from unnecessary technical jargon or complexity. This means that financial statements should be presented in a manner that is accessible to a wide range of users, including those without specialized financial knowledge.

Understandability is important for several reasons:

1. It enhances the usefulness of financial information. If financial information is presented in a clear and concise manner, users are more likely to be able to understand and use that information to make informed economic decisions.
2. It promotes transparency and accountability in financial reporting. If financial information is presented in a clear and concise manner, it is more likely that entities will provide accurate and complete information about their financial position and performance.
3. It encourages the use of financial information by a wide range of users. If financial information is presented in a way that is understandable to users with a reasonable level of financial knowledge, it is more likely that a wide range of users will be able to use and benefit from that information.

Overall, understandability is an important qualitative characteristic of financial information, as it helps to ensure that financial reporting is accessible, transparent, and useful to a wide range of users.