Under the concept of consistency, changes in accounting principles must be justifiable.

• A. True
• B. False
• C. Sometimes
• D. Never

Answer: (A)

Consistency means applying the same accounting policies across periods so readers can compare results over time. Because this comparability is valuable, you don’t change accounting principles on a whim. Any change in principle has to be justified—usually because a new standard requires it or because the change results in a more accurate or reliable picture of the company’s financial position and performance. When a justified change occurs, you disclose it and adjust prior periods when possible (retrospectively) to preserve comparability, or apply the change with the earliest practical date if restating is impracticable. Note that changes in principles differ from changes in estimates, which are handled separately and typically on a prospective basis.