Prudence: Difference between revisions
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imported>Doug Williamson (Add quote.) |
imported>Doug Williamson (Add second definition.) |
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''Accounting.'' | 1. ''Accounting.'' | ||
The accounting practice of recognising income and assets only when they are reasonably certain, whilst recognising expenses and liabilities whenever they are probable. | The accounting practice of recognising income and assets only when they are reasonably certain, whilst recognising expenses and liabilities whenever they are probable. | ||
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:''IFRS Conceptual Framework project summary, March 2018'' | :''IFRS Conceptual Framework project summary, March 2018'' | ||
2. ''Risk management and strategy.'' | |||
In risk management and strategy, 'prudent' approaches are conservative ones, reflecting a relatively low risk appetite. | |||
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* [[Big bath]] | * [[Big bath]] | ||
* [[Conceptual framework]] | * [[Conceptual framework]] | ||
* [[Conservative]] | |||
* [[Consistency]] | * [[Consistency]] | ||
* [[Disaggregation]] | * [[Disaggregation]] | ||
* [[IFRS]] | * [[IFRS]] | ||
* [[Neutrality]] | * [[Neutrality]] | ||
* [[Reckless prudence]] | |||
* [[Risk management]] | |||
[[Category:Accounting,_tax_and_regulation]] | [[Category:Accounting,_tax_and_regulation]] | ||
Revision as of 10:33, 8 March 2019
1. Accounting.
The accounting practice of recognising income and assets only when they are reasonably certain, whilst recognising expenses and liabilities whenever they are probable.
Prudence is not an excuse for accounting manipulations such as 'big bath' provisioning.
- Neither overstate, nor understate
- Neutrality is supported by the exercise of prudence.
- Prudence is the exercise of caution when making judgements under conditions of uncertainty.
- Prudence does not allow for overstatement or understatement of assets, liabilities, income or expenses.
- IFRS Conceptual Framework project summary, March 2018
2. Risk management and strategy.
In risk management and strategy, 'prudent' approaches are conservative ones, reflecting a relatively low risk appetite.
