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

Question

Quizplus · Accepted Answer

Comparability requires an entity, as far as possible, to use the same accounting method from year to year to enable users to compare financial statements over time. However, if there is a change in accounting method, it should be disclosed and the impact on financial statements should also be provided. Option B is incorrect because a company can change its accounting method if it is required to do so to comply with accounting standards, regulations or for better presentation of financial statements. Option C is also incorrect because comparability does not mean that all firms in the same industry should use the same accounting methods. Option D is also incorrect because different depreciation methods can be employed for different classes of non-current assets.

Which Statement Relating to Comparability Is True