Comparability Concept

 Comparability Concept

• Comparability of Financial statement means that financial statement of a period is comparable with other period and also with financial statement of other companies. This concept has been elaborated below

1.    Comparable with previous period

Financial statement of a company should be comparable with Financial statements of previous period. It means that information is required to be presented in a way that it facilitates comparison with previous period.  Such comparison is important for financial performance evaluation of the company over the period of time.

2.    Comparable with Industry

Financial statements of company or entity should be presented in a way, that those Financial statements are comparable  with financial statements of other companies in  industry. This objective can be achieved by  preparing standard financial statement  as per requirement of International accounting Standards. It is important to note that such comparison is focuses on overall performance rather than item to item comparability.

3.    Comparability & Performance Evaluation

Comparability is important aspect for determining the financial performance of the company over the period of time. Such comparison is only possible, If information of different periods are comparable.

4.    Trend

Comparability is also an important aspect of establishing the trend. For example if last year sales were 10 million ,and this year sales are 12 million. Then there is trend of  sales growth. The trend information can be used by the management for forming important decision making. 

Financial Statements Comparability Concept

Financial Statements Recognition Concept

Measurement Concept
Going Concern Concept