Factors Affecting Comparability of Accounting Information

C

A change in the representation by an accounting firm has no material effect on the accounting information.

The comparability of accounting information refers to the ability to make meaningful comparisons of financial data between different accounting periods. Certain events and changes can impact the comparability of accounting information for a given company. Let's analyze each option to determine which factors affect comparability:

I. Change in accounting principles: This refers to a company adopting a new set of accounting principles or changing its existing ones. Different accounting principles can lead to variations in the recognition, measurement, and presentation of financial information. As a result, the financial statements of the company may not be directly comparable between different accounting periods. Therefore, a change in accounting principles affects comparability.

II. Disposition of segment of business: When a company sells or disposes of a segment of its business, such as a division or subsidiary, it can have a significant impact on its financial statements. The sale or disposition of a segment can lead to changes in revenues, expenses, assets, and liabilities. These changes can affect the comparability of accounting information, as the financial statements of the company before and after the disposition may not be directly comparable. Therefore, the disposition of a segment of the business affects comparability.

III. Acquisition of company accounted for using purchase accounting: When a company acquires another company and accounts for the acquisition using purchase accounting, it can impact the financial statements of the acquiring company. Purchase accounting involves allocating the purchase price to the acquired company's assets and liabilities based on their fair values. This allocation can result in changes to the acquiring company's financial statements, including the recognition of goodwill, adjustments to depreciation and amortization expenses, and changes in future cash flows. As a result, the financial statements of the acquiring company before and after the acquisition may not be directly comparable. Therefore, the acquisition of a company accounted for using purchase accounting affects comparability.

IV. Change in auditors: A change in auditors refers to a company switching its external audit firm or engaging a different audit firm to perform the audit of its financial statements. While a change in auditors can impact the reliability and quality of financial reporting, it does not directly affect the comparability of accounting information. The financial statements prepared under the new auditor should still be comparable to the financial statements prepared under the previous auditor, assuming there are no other significant changes in accounting principles, business segments, or acquisitions. Therefore, a change in auditors does not affect comparability.

Based on the analysis above, the factors that affect the comparability of accounting information for a given company from one accounting period to the next are: A. I, III, and IV.

Therefore, the correct answer is A. I, III, and IV.