Accounting Consistency- Key to Stockholder Information.

Abstract In order to investigate the effects that various sets of accounting policies have in interpreting economic events, it is necessary to compare the results of applying one set with those of applying another in some quantifiable way. As described above, the important issue is the degree of similarity between the fluctuations in earnings reported under the two policy sets. A standard statistical test, the index of determination, has been employed to investigate this similarity. In order for the hypotheses to be established, the indices of determination between consistent firms must be significantly higher than the indices between moderately inconsistent firms. In turn, the indices for moderately inconsistent firms must exceed those for markedly inconsistent firms by a significant margin. the others. Consistent application of accounting policies, however diverse these policies may be, will lead to earnings per share results that depict economic fluctuations more accurately and similarly than even moderately inconsistent application of accounting policies, however initially similar these may have been.