Which concept ensures that financial statements are comparable over periods?

The consistency principle is crucial for ensuring that financial statements are comparable over different periods. This principle mandates that businesses must apply the same accounting methods and principles from year to year. By maintaining consistency, financial statement users can accurately analyze trends and make meaningful comparisons across different reporting periods.

When a company changes its accounting policies or practices from one period to another without proper disclosure, it can distort the financial reporting and mislead users. Therefore, adherence to the consistency principle enhances the reliability and clarity of financial information, enabling stakeholders to derive comparable insights about a company’s financial performance and position over time. This principle fosters transparency and trust in the financial reporting process.

In contrast, the relevance principle focuses on providing information that is useful and timely for decision-making, but it does not directly address the comparability of financial statements over time. The full disclosure principle emphasizes the importance of providing all necessary information so users can have a complete understanding of the financial context, but again, this does not specifically ensure comparability. The going concern principle relates to the assumption that an entity will continue its operations for the foreseeable future and is not about comparability across periods.