ACCA Applied Knowledge · Financial Accounting · Qualitative characteristics of useful financial information
Kiln Co changed its inventory valuation method this year and did not restate prior-year figures or disclose the change. Which enhancing qualitative characteristic is most directly impaired for users comparing Kiln Co's results over time?
Comparability is most directly impaired. Changing the inventory valuation method without restating prior figures or disclosing the change prevents users from identifying real differences between periods, which is the purpose of comparability. Timeliness, verifiability and understandability are not the main issue.
- ATimeliness
- BComparabilityCorrect
- CVerifiability
- DUnderstandability
Explanation
Comparability lets users identify similarities and differences between items, including across periods. An undisclosed change in method without restatement stops users comparing results across years. Timeliness concerns how soon information is available, which is not affected here.
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