Business, Legal & Accounting Glossary
Qualitative characteristic expected in financial statements, comparable within company and between companies.
In accounting, comparability points toward the ability of users of financial statements to compare companies. It follows that companies of a similar nature are better compared to each other through their financial statements. Thus, the convention of comparability increases the usefulness of the financial statements. Users may compare financial data from company to company by, for example, benchmarking several companies against industry trends or in many cases by deriving an industry trend from a collection of similar companies’ financials themselves. Further utility is derived from the fact that such sets of data may be compared over time to track and gauge a company’s historical performance. The FASB directs a great deal of effort toward setting accounting standards that standardize the items included for specific industries and accounting situations in order to promote usefulness through comparablity.
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This glossary post was last updated: 18th April, 2020 | 84 Views.