The same accounting methods should be used from one accounting period to another unless there is good reason to change methods.  If a change in method occurs, full disclosure of the effects of the change should be made.

Consistent use of accounting methods over a span of time is an important quality that makes accounting numbers more useful.

APB Opinion No. 20 states that in the preparation of financial statements there is a presumption that an accounting principle once adopted  should not be changed in accounting for events and transactions of a similar type.  Consistent use of accounting principles from one accounting period to another enhances the utility of financial statements to users by facilitating analysis and understanding of comparative accounting data (paragraph 15.)

Consistent use of accounting principles from one accounting period to another, if pushed too far, can inhibit accounting progress.  No change to a preferred accounting method can be made without sacrificing consistency, yet there is no way that accounting can develop without change. (Concepts Statement No. 2, paragraph 12)


Various meanings of objectivity

  • Measurements that are impersonal or existing outside the mind of the person making the measurement.
  • measurements based on verifiable evidence.
  • measurements based on a consensus of qualified experts.

  • the narrowness of the statistical dispersion of the measurements of an attribute when made by different measures.
    (Hendriksen, Accounting Theory, 4th edition)

  • Objective. . . relates to the expression of facts without distortion from personal bias.
  • Verifiable, objective evidence has therefore become an important element in accounting and a necessary adjunct to the proper execution of the accounting function of supplying dependable information.
  • Accounting can never. . . become completely scientific because its factual materials can never be determined with complete and conclusive objectivity.
(Paton and Littleton, An introduction to Corporate Accounting Standards.)


Full Disclosure

The full disclosure principle means that the financial reports should include any information that could affect the decisions made by the external users. However, the benefits (relevance) of the information should exceed the costs of providing the information.
(Spiceland, Intermediate Accounting, 3rd edition)
Full Disclosure recognizes that the nature and amount of information included in financial reports reflects a series of judgmental trade-offs.  These trade-offs strive for
  1. sufficient detail to disclose matters that make a difference to users, yet
  2. sufficient condensation to make the information understandable, keeping in mind the cost of preparing and using it.
Disclosure is not a substitute for proper accounting.
(Keiso, Intermediate Accounting, 11th edition)


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