discuss consistency of presentation as a general feature of financial statements

Expert Solution

CONSISTENCY OF PRESENTATION AS A GENERAL FEATURE OF FINANCIAL STATEMENTS.

The consistency principle in the presentation of financial statements means that once an organization has adopted an accounting method , principle , practice and procedure ,then the company shall continue to follow those same accounting methods , principles ,practices and procedures for events and transactions that are materially similar even in the future accounting periods.
This principle of consistency in the presentation of financial statements is related to some qualitative characteristics like reliability of the financial statement and comparibility of the financial statements over a period of time . It is these very important features or qualities that makes the accounting information very useful.
Users of the financial statements can go with the presumption and understanding that that the same rules and principles are followed in all the years for which the financial statements are reported unless there are justifiable reasons to adopt some changes.
This principle of consistency in the presentation of financial statements may not be always possible or feasible to follow if there is are reasonable grounds for change and there are sufficient reasons for adopting a more preferred method or procedure.The valid reasons for adopting a change could be due to changed circumstances, material changes in the nature of the business operations or the requirements of a new IFRS.
If an organization has adopted a change then the organization must clearly document and disclose the nature of change , reasons for adopting the change and its effects on the items of the financial statements and this document should be included in the notes accompanying the company’s financial statements.

Example: If a company is following the declining method of depreciation for its equipment . Then as per the consistency principle it should continue use that declining method for its equipment in the subsequent periods also and if the company wants to change over to another depreciation method like straight line method then the company must state the nature of change , the reasons for change and the effect of the change on items like the accumulated depreciation in its financial report.

Sometimes if there are no valid reasons for change and still the company has gone in for a change in the accounting method or principle or procedure then the auditor may refrain from giving an opinion on the financial statements.

ekkarill92 answered 2 years ago

The objective of IAS 1 Presentation of Financial Statements is to prescribe the basis for presentation...

The objective of IAS 1 Presentation of Financial Statements is to prescribe the basis for presentation of general purpose financial statements, in order to ensure comparability both with the enterprise’s own financial statements of previous periods and with the financial statements of other enterprises. Discuss how far the objectives of IAS 1 are relevant in today’s environment. (Approx 1300 words). Support your answer with examples.

Take recently published financial statements of any bank and discuss about their requirements for presentation and...

Take recently published financial statements of any bank and discuss about their requirements for presentation and disclosure as compared to financial statements of organisations (manufacturing and merchandise) which are not banks.

Compare the requirements for presentation and disclosure as to financial statements of a bank and that...

Compare the requirements for presentation and disclosure as to financial statements of a bank and that of an organisation.

Briefly discuss the financial presentation of equity investments

General-purpose financial statements are the product of

1. General-purpose financial statements are the product of a. financial accounting. b. managerial accounting. c. both financial and managerial accounting. d. neither financial nor managerial accounting. 2. Users of financial reports include all of the following except a. creditors. b. government agencies. c. unions. d. All of these are users. 3. Which of the following represents a form of communication through financial reporting but not through financial statements? a. Balance sheet. b. President's letter. c. Income statement. d. Notes to financial statements. 4. The process of identifying, measuring, analyzing,...

1.)Who is responsible for the fair presentation of the financial statements and the integrity of the...

1.)Who is responsible for the fair presentation of the financial statements and the integrity of the system of internal controls? A. The independent registered accounting firm B. The CEO and CFO C. Management of the company D. The Board of Directors 2.)Which of the following is NOT included in the cash flow profile? A. Cash received from customers B. Cash paid for inventory purchases C. Free cash flows D. cash used to...

An important feature of the financial statements of state and local governments is the two-layer reporting...

An important feature of the financial statements of state and local governments is the two-layer reporting system. In addition to the traditional fund financial statements, the Governmental Accounting Standard Board (GASB) issued Statement No. 34 to add a new layer of reporting, the government-wide financial statements. The government-wide statements are presented using the full accrual basis of accounting and with the economic resources’ measurement focus. Combined with the fund level statements, the financial overview of the governmentwide financial statements provides...

what is the accounting process within the standard framework and the presentation of the financial statements...

what is the accounting process within the standard framework and the presentation of the financial statements between the following regulatory agencies: SEC FASB IASB GASB what are the strengths and weaknesses of each agency that sets the standards.

1. what is entry financial performance and position? 2.what is IFRS presentation financial statements?

Topic to be tested: Financial Statements Learning Objectives: To understand the presentation of Profit and loss...

Topic to be tested: Financial Statements Learning Objectives: To understand the presentation of Profit and loss account/Income statement. GDB Question: Mr. Waseem is working as an accountant in a business organization under the name of ABC Brothers. He has recently prepared financial statements by using the data available in Trial Balance of ABC Brothers and he has presented the financial statements to the Manager accounts of the organization. Manager accounts observed the following errors in the income statement prepared by...

Question