Which action should be considered when assessing the significance of an accounting change?

When assessing the significance of an accounting change, the influence on financial statement comparability is a key consideration. This is because accounting changes can affect the consistency, reliability, and comparability of financial statements over time. Investors and analysts rely on comparative financial statements to make informed decisions and assessments. If an accounting change introduces inconsistencies or makes past financial data less comparable, it can significantly impact the understanding and evaluation of financial performance.

Financial statement comparability allows users to analyze trends and make better comparisons between periods or with peer companies. Thus, any change that hampers this comparability may mislead stakeholders regarding the company’s true financial position and performance. Other factors, such as stockholder payouts or changes in market conditions, may also be important, but the primary focus for assessing the significance of an accounting change should emphasize maintaining comparability across reporting periods.