Financial information does not demonstrate comparability when:
A)companies in the same industry use different accounting policies to account for the same type of transaction.
B)one company changes its estimate of the residual value of a fixed asset while the other company does not change it.
C)one company fails to adjust its financial statements for changes in the fair value of short term investments, while the other company makes the adjustment.
D)both companies use different suppliers.

Question

Quizplus · Accepted Answer

When companies in the same industry use different accounting policies to account for the same type of transaction, the financial information cannot be compared as there is no uniformity in the presentation of data. It leads to distortion in the relative financial position and performance of such companies.

Financial Information Does Not Demonstrate Comparability When