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In accounting, the convention of conservatism, also known as the doctrine of prudence, is a policy of anticipating possible future losses but not future gains. It states that when choosing between two solutions, the one that will be least likely to overstate assets and income should be selected.
Consistency principle: The company uses the same accounting principles and methods from period to period. Conservatism principle: When choosing between two solutions, the one which has the less favorable outcome is the solution which should be chosen (see convention of conservatism)
In accounting, lower of cost or market (LCM or LOCOM) is a conservative approach to valuing and reporting inventory. Normally, ending inventory is stated at historical cost. However, there are times when the original cost of the ending inventory is greater than the net realizable value, and thus the inventory has lost value.
IFRS deny the concept of accounting conservatism; IFRS give prominence to economic reality over legal form; Directors can not make heads or tails of IFRS financial statements; IFRS financial statements do not reflect the business model; Financial instruments are stated at "full fair value", thereby maximizing earnings volatility.
Moreover, the Conservatism is also a less dominated constraint, which means firms also need to consider more about bad news than good news when reporting financial statements. [18] In particular, firms need to choose the method that "least likely overstates assets and income or understates liabilities and losses" [3] when encountering ...
Seeking a more positive definition, the Conservative Political Action Conference, or CPAC, defines conservatism as "the political philosophy that sovereignty resides in the person.
Many Americans believe the United States was founded as a Christian nation, and the idea is energizing some conservative and Republican activists. No. What does the Constitution say about religion?
The concept of earnings quality has roots in the judgmental nature of accounting, which can be seen in the fact the different parties may interpret the economics underlying a transaction differently, and different firms may have different business characteristics.