According to the unit of measurement principle, what must be consistent in financial reporting?

• A. The use of diverse currencies for reporting
• B. The measurement of financial data in the same currency unit
• C. The application of different currencies depending on the market
• D. Using historical values over current monetary value

Answer: (B)

The unit of measurement principle in accounting emphasizes the need for consistency in the currency used for financial reporting. This principle dictates that all financial transactions and events should be recorded in a stable monetary unit, ensuring that financial statements are comparable and understandable. By measuring financial data in the same currency unit, companies can provide clear, coherent reports that enable stakeholders to accurately assess the financial performance and position of the organization.

If different currencies were used in the financial reporting process, it would create confusion and hinder comparisons across time periods or with other companies. Thus, maintaining a consistent currency unit allows for meaningful analysis and interpretation of financial information, aligning with the overall goal of transparency and consistency in financial reporting.