COMPARABILITY ACCOUNTING PRINCIPLE

Before speaking about the Comparability accounting principle, itll be

appropriate to provide a brief definition of accounting principles themselves. The
Accounting principles are a standardized set of rules and principles that have formed
the framework used for financial accounting today, these principles are a necessity as
it serves to ensure that the various users of accounting information are not
misinformed by false practices which goes against the essence of accounting
professionalism thus ensuring that the financial statements generate provide a True
and Fair view (This principle harps on the suggestion that businesses financial
statements should accurately and faithfully portray their business activities and
operating results). It is important however to note that the True and Fair view
concept does not necessarily portray the absolute truth about the firm since
accounting statements themselves are only estimates and judgments made by
management. Another important fact to note is that accounting information is not all
about its outline, organization and auspiciousness, instead it needs a vital quality
which makes its data distinctive and that quality is Comparability.
The Comparability concept is one of the aforementioned accounting concepts
and also a very vital quality that is necessary for all prepared financial statements.
The comparability concept can be simply defined as accounting data, which is true
and well documented, should be kept in such a way that the data should be complied
with the policies, the industry standard and the standards followed in the previous
years. The financial statements of one accounting period must be able to be
compared with the financial statements of other accounting periods of same company
or different company in the same industry so as to ensure that the users of accounting
(external and internal) derive meaningful conclusions about the trends in an entity's
financial performance and position over time.

THE IMPORTANCE OF THE COMPARABILITY CONCEPT

Realistically asking, can financial data that cannot be compared referred to as
good data? Off course not, this is because this data wouldnt possess the quality that
makes it to be similar and comparable to other data from same industry or previous
years. The Comparability principle does not necessary reject or prohibit changes in

the method of preparing accounting information because changes in the accounting

procedures of a business may be required in order to improve the relevance and
reliability of its financial statements and changes in accounting procedures could also
be imposed by various accounting standard boards.
The comparability principle is off major importance because it provides financial
statements the comparability quality that makes it possible for the information
analysis to be done quickly, easily and comprehensively. These qualities are a
necessity for the investors to be able to get the statements overview and comparison
within the industry to shape up their investment decision and such decision are
necessary for businesses in order to keep them running and with a constant inflow of
investment. Investment for businesses is major concern as it is a necessity for keeping
its financial wheels running and this is not possible without investors who themselves
will not get involved with any business or firm that prepare its financial statements
without the comparability quality.
Some examples of the Comparability accounting principle is given below:
1.
Shoot You Co. had actively kept their depreciation for the year 2000 to 2012 in
straight line format but in the current accounting period the entity changed the
format of depreciation to reducing method, the statements from 2000 to 2012
which used the straight line depreciation method would not be able to be
compared to the newer statements that use the reducing balance depreciation
2.

method.
Shoot You tax agency can compare the year 2001 income statement of a
company with the year 2002 income statement of that company if both companies
use the same accounting principles and procedures in preparing their respective
statements thus promoting comparability.