How Comparability is achieved

How Comparability is achieved

Financial statement information must be comparable with the previous period and financial statement of other entities of at least same industries. Application of International accounting standard ensures the comparability of the different financial statements.

Comparability can be achieved through consistent presentation and entity does not change its presentation unless and until required by international accounting standards or management is of the view that a change in presentation will achieve more appropriate and relevant representation.

Why Comparison is important

The comparison is important for the following reasons.

1.  Performance Evaluation: Comparison facilitates the performance evaluation over the period of time. It has special significance where the ownership and management are two different functions i.e. listed companies.

2. Determine a Trend: Comparison is also required to establish a trend which is very effective decision making tool for the future investments.