ExpertMedium2 marksMultiple Choice
ACCA · Question 05 · Qualitative Characteristics
AgriGrow, a large agricultural firm, recently changed its method of depreciating tractors from the straight-line method to the reducing balance method to better reflect the pattern of consumption of the tractors' economic benefits. Which qualitative characteristic is primarily supported by ensuring this change is properly disclosed in the notes to the financial statements?
AgriGrow, a large agricultural firm, recently changed its method of depreciating tractors from the straight-line method to the reducing balance method to better reflect the pattern of consumption of the tractors' economic benefits. Which qualitative characteristic is primarily supported by ensuring this change is properly disclosed in the notes to the financial statements?
Answer options:
A.
Comparability
B.
Timeliness
C.
Verifiability
D.
Materiality
How to approach this question
Consider why we disclose changes in accounting methods—it's so users can compare this year's results with last year's.
Full Answer
A.Comparability✓ Correct
Comparability is the enhancing qualitative characteristic that enables users to identify and understand similarities in, and differences among, items. When an entity changes an accounting estimate (like depreciation method), disclosing it ensures users can still compare performance over time.
Common mistakes
Selecting 'Understandability'—while disclosure helps understanding, the specific goal of disclosing a change in method is to maintain comparability across periods.
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