Conceptual Framework for Financial Reporting

Enhancing qualitative characteristics
Comparability, verifiability, timeliness and understandability are qualitative
characteristics that enhance the usefulness of information that both is
relevant and provides a faithful representation of what it purports to
represent. The enhancing qualitative characteristics may also help determine
which of two ways should be used to depict a phenomenon if both are
considered to provide equally relevant information and an equally faithful
representation of that phenomenon.
2.20
2.21
2.22
2.23
Conceptual Framework
A28
© IFRS Foundation

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Comparability
Users’ decisions involve choosing between alternatives, for example, selling or
holding an investment, or investing in one reporting entity or another.
Consequently, information about a reporting entity is more useful if it can be
compared with similar information about other entities and with similar
information about the same entity for another period or another date.
Comparability is the qualitative characteristic that enables users to identify
and understand similarities in, and differences among, items. Unlike the other
qualitative characteristics, comparability does not relate to a single item. A
comparison requires at least two items.
Consistency, although related to comparability, is not the same. Consistency
refers to the use of the same methods for the same items, either from period
to period within a reporting entity or in a single period across entities.
Comparability is the goal; consistency helps to achieve that goal.
Comparability is not uniformity. For information to be comparable, like
things must look alike and different things must look different. Comparability
of financial information is not enhanced by making unlike things look alike
any more than it is enhanced by making like things look different.
Some degree of comparability is likely to be attained by satisfying the
fundamental qualitative characteristics. A faithful representation of a relevant
economic phenomenon should naturally possess some degree of comparability
with a faithful representation of a similar relevant economic phenomenon by
another reporting entity.
Although a single economic phenomenon can be faithfully represented in
multiple ways, permitting alternative accounting methods for the same
economic phenomenon diminishes comparability.