Why Is Consistency Needed in Compliance with the Comparability Requirement?

To avoid misunderstanding, it is important to clarify what comparability is not. Comparability is not consistency. Consistency refers to the use of the same accounting methods or principles by a firm for the same items over time. Comparability is a goal of consistency and, thus, consistency helps achieve comparability.

Why do accounting standards require consistency and comparability?

Consistency refers to application of accounting standards and policies consistently from one period to another and from one region to another. Comparability improves usefulness of financial statements because it allows users to carry out trend analysis, cross-sectional analysis and common-size analysis.

Why is consistency principle important?

Consistency principle is useful for measuring trends in the business which is spread across many accounting periods. If the business keeps on changing accounting methods, it will create confusion and the financial statements will not be comparable across accounting periods.