ExpertMedium2 marksMultiple Choice
ACCA · Question 05 · The Qualitative Characteristics of Financial Information
GreenHarvest Farms changes its depreciation method for tractors from straight-line to reducing balance to better reflect the pattern of usage. Which enhancing qualitative characteristic is primarily supported by disclosing this change and its financial effect in the notes?
GreenHarvest Farms changes its depreciation method for tractors from straight-line to reducing balance to better reflect the pattern of usage. Which enhancing qualitative characteristic is primarily supported by disclosing this change and its financial effect in the notes?
Answer options:
A.
Verifiability
B.
Comparability
C.
Timeliness
D.
Relevance
How to approach this question
Think about why we disclose changes in methods. It's so users can adjust their analysis when looking at this year versus last year.
Full Answer
B.Comparability✓ Correct
Comparability is the enhancing qualitative characteristic that enables users to identify and understand similarities and differences among items. When an entity changes an accounting estimate (like depreciation method), disclosing the effect ensures users can still compare current performance with past performance.
Common mistakes
Confusing fundamental characteristics (Relevance) with enhancing characteristics (Comparability, Verifiability, Timeliness, Understandability).
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