Which statement relating to comparability is correct?
A) It means a company can never change an accounting method.
B) It means all firms in the same industry should use the same accounting methods.
C) It means the same depreciation method must be employed for all classes of non-current assets.
D) It requires an entity, as far as possible, to use the same accounting method from year to year.

Question

Quizplus · Accepted Answer

Comparability requires an entity to use the same accounting method from year to year, as far as possible. This is because changes in accounting methods can make it difficult to compare financial information over time. However, if a change in accounting method is necessary, the entity should disclose the change and its impact on financial statements. Option A is not correct because a company may change an accounting method if required by accounting standards. Option B is not correct because comparability does not require all firms in the same industry to use the same accounting methods. Option C is partially incorrect because the same depreciation method should not necessarily be employed for all classes of non-current assets. Instead, an appropriate depreciation method should be used for each class of assets based on factors such as the asset's useful life and expected pattern of benefits.

Which Statement Relating to Comparability Is Correct