What would you think of a company’s ethics if it changed accounting methods every year?

) It is a indication of wrong ethics adopted by the company unless company has some compelling exceptional reason for doing so. There can not be so many frequent changes in accounting policies. It will give a wrong signal to the stockholders and other investor in the market. One probable reason come to mind for doing so may be earnings management. This change will have a impact on reported profit. In case of rising inventory prices, if company want to reduce it profits then it will follow LIFO method and if company want to increase it profits then it will follow FIFO method. While in case of decreasing inventory prices and company want to increase its reported profits the it will follow LIFO and if it want to decrease its reported profits then it will follow FIFO method. Accordingly this is the main reason for changing the inventory method so frequently. 2) Changing inventory method every year will violate the accounting principle of consistency. This principle require that accounting principle and estimate should be based on careful consideration and should be able to provide the correct representation of financial statements.

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