What does the consistency concept require?

What does the consistency concept require?

• A. A Change bases year over year to reflect current preferences
• B. B Use the same accounting techniques and valuation bases over time
• C. C Always use FIFO for inventories
• D. D Never disclose changes

Answer: (B)

The consistency concept means you apply the same accounting methods and valuation bases from period to period so financial statements are comparable over time. This steady approach lets users see genuine performance and trends rather than being influenced by changes in measurement. The best choice states using the same techniques and valuation bases over time, which preserves comparability. If a change in policy is ever needed, it should be disclosed and handled so readers understand the impact, not hidden. Changing bases year after year would break comparability, so it isn’t what consistency requires. Rigidly insisting on one method like FIFO for inventories isn’t required by consistency—it’s about applying whatever method you’ve chosen consistently. And never disclosing changes would violate accounting practice, since policy changes must be disclosed to users.

The consistency concept means you apply the same accounting methods and valuation bases from period to period so financial statements are comparable over time. This steady approach lets users see genuine performance and trends rather than being influenced by changes in measurement.

The best choice states using the same techniques and valuation bases over time, which preserves comparability. If a change in policy is ever needed, it should be disclosed and handled so readers understand the impact, not hidden.

Changing bases year after year would break comparability, so it isn’t what consistency requires. Rigidly insisting on one method like FIFO for inventories isn’t required by consistency—it’s about applying whatever method you’ve chosen consistently. And never disclosing changes would violate accounting practice, since policy changes must be disclosed to users.