What does the principle of relevance in financial reporting emphasize?

The principle of relevance in financial reporting emphasizes that reports should be useful for decision-making. This principle ensures that the information presented is pertinent and provides insights that can aid stakeholders, such as management, investors, and regulators, in making informed choices. Relevant financial information can affect the decisions made by users because it can highlight trends, predict future outcomes, and provide context for financial performance. Therefore, information that is timely and applicable to the context in which it is used enhances its utility for decision-makers.

The other concepts mentioned, like confidentiality, compliance with legal standards, and reliance solely on historical data, do not align with the essence of the relevance principle. While these aspects may be important in their own right, they do not capture the primary focus of ensuring that financial information is geared toward enhancing decision-making capability.