Consistency Principle - AccountingTools

Home >> Accounting Principles

The Consistency Principle

The consistency principle states that, once you adopt an accounting principle or method, you should continue to follow it consistently in future accounting periods. You should only change an accounting principle or method if the new version in some way improves reported financial results. if you make such a change, you should fully document its effects, and include this documentation in the notes accompanying the financial statements.

Auditors are especially concerned that their clients follow the consistency principle, so that the results reported from period to period are comparable. An auditor may refuse to provide an opinion on a client's financial statements if there are clear and unwarranted violations of the principle.

The consistency principle is most frequently ignored when the managers of a business are trying to report more revenue or profits than would be allowed through a strict interpretation of the accounting standards. A telling indicator of such a situation is when the underlying company operational activity levels do not change, but profits suddenly increase.

Similar Terms

The consistency principle is also known as the consistency concept.