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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.
Its mission was to develop an overall conceptual framework of US generally accepted accounting principles (US GAAP). APB was the main organization setting the US GAAP and its opinions are still an important part of it. All of the Opinions have been superseded in 2009 by FASB's Accounting Standards Codification.
Under the AICPA's Code of Professional Ethics under Rule 203 – Accounting Principles, a member must depart from GAAP if following it would lead to a material misstatement on the financial statements, or otherwise be misleading. In the departure, the member must disclose, if practical, the reasons why compliance with the accounting principle ...
] U.S. accounting firms are opposed to convergence because of the familiarity of GAAP, the unfamiliarity with international accounting principles, and other countries' accounting systems. U.S. firms and other CPAs have been reluctant to adapt and learn a new accounting system, and believe that IFRS lacks guidance compared to the GAAP.
The Law also defines the accounting framework applicable under Lux GAAP, especially the principles relevant to the preparation of financial statements, especially the prudence principle under which unrealised gains are not recognised except where fair value is applicable, in stark contrast to rules under International Financial Reporting ...
Before the Codification, accounting standards lacked a consistent and logical structure. For the last 50 years, U.S. GAAP consisted of thousands of standards with multiple standard setters. The old U.S. GAAP were difficult to interpret, and the complexity of the standards made it hard for users to stay up to date.
Management accounting principles (MAP) were developed to serve the core needs of internal management to improve decision support objectives, internal business processes, resource application, customer value, and capacity utilization needed to achieve corporate goals in an optimal manner.
Although prudence itself does not perform any actions, and is concerned solely with knowledge, all virtues are regulated by it. For example, distinguishing when acts are courageous, as opposed to reckless or cowardly, is an act of prudence. In modern English, the word "prudence" has become closely associated with cautiousness.