In accounting, comparability refers to the quality of accounting information that makes an entity’s reporting about its performance, from different aspects, comparable with management-defined performance measures and with the performance of other similar entities.
Comparability also implies the degree to which accounting norms and policies are consistently applied from one reporting period to another. It is an essential element for standardization of accounting information and hence it allows an entity’s financial statements to be set against those of other entities.
This constitutes a fundamental requirement of financial reporting that has to be available to the users of financial statements who can compare financial results (reflecting different aspects of performance as measured monetarily) between reporting periods, as well as between reporting entities.
For example, a business entity that publishes comparable financial statements over time allows the users of its financial statements (such as investors, creditors and government agencies) to set its financial results against a timeline backstage and on a trend line, period to period. If companies operating within the same sector consistently apply the same industry-specific accounting norms and standards to their financial reporting, a high level of comparability can be achieved within that industry.
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