Which of the following statement(s)is/are true of the qualitative characteristic "comparability"?
A)A financial report must show corresponding results for the preceding period.
B)A financial report must be presented in a consistent manner,hence,an entity must adopt similar accounting policies from period to period even though a more reliable and relevant alternative exist.
C)A financial report must contain all material and relevant items.
D)All of the given answers.
E)A financial report must show corresponding results for the preceding period and be presented in a consistent manner,hence,an entity must adopt similar accounting policies from period to period even though a more reliable and relevant alternative exist.

Question

Quizplus · Accepted Answer

The qualitative characteristic of "comparability" in financial reporting refers to the ability of users to identify and understand similarities in and differences between items. This characteristic does not exist in isolation but is closely related to other qualitative characteristics such as relevance and reliability.
Let's evaluate the given statements:
1. A financial report must show corresponding results for the preceding period.
This statement is true in the context of comparability. Showing corresponding results for the preceding periods allows users to compare the financial performance and position over time.
2. A financial report must be presented in a consistent manner, hence, an entity must adopt similar accounting policies from period to period even though a more reliable and relevant alternative exists.
This statement is partially true. While consistency enhances comparability, it is not absolute. An entity may change accounting policies if the change is expected to result in a more relevant and reliable representation of events or conditions, as per the accounting standards. The change and its effects should be disclosed.
3. A financial report must contain all material and relevant items.
This statement is true but it relates more to the qualitative characteristics of relevance and materiality rather than comparability directly. However, including all material and relevant items does contribute to comparability as it ensures that users are comparing like with like.
4. All of the given answers.
Since statement 2 is only partially true, this option is not correct.
5. A financial report must show corresponding results for the preceding period and be presented in a consistent manner, hence, an entity must adopt similar accounting policies from period to period even though a more reliable and relevant alternative exists.
This statement combines elements of statements 1 and 2. As discussed, consistency should not prevent the adoption of more relevant and reliable accounting policies. Therefore, this statement is not entirely true.
Based on the above analysis, the most accurate answer regarding the qualitative characteristic of comparability is:
A financial report must show corresponding results for the preceding period (statement 1) and must contain all material and relevant items (statement 3). However, while consistency is important for comparability, it is not absolute, and changes in accounting policies are permissible when they provide more reliable and relevant information (a nuanced view of statement 2).

Which of the Following Statement(s)is/are True of the Qualitative Characteristic