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How does the concept of consistency aid in the analysis of financial statements? What type of...

How does the concept of consistency aid in the analysis of financial statements? What type of accounting disclosure is required if this concept is not applied?

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The Concept of Consistency requires the entity to provide the same treatment to comparable transactions from period to period. This adds to the usefulness of the reports, since the reports from one period are comparable to the reports from another period. It also facilitates detection of trends. It also enables the investors and other users of the financial statements to easily and correctly compare the financial statements of a company. If for any valid reasons the accounting policy is changed, a business must disclose the nature of change, reasons for the change and its effect on the items of the financial statements.

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