Prudence: Difference between revisions

From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson
m (Amend header.)
imported>Doug Williamson
(Add link.)
Line 25: Line 25:
== See also ==
== See also ==
* [[Accounting concepts]]
* [[Accounting concepts]]
* [[Accruals accounting]]
* [[Accruals concept]]
* [[Accruals concept]]
* [[Big bath]]
* [[Big bath]]

Revision as of 13:55, 13 March 2021

1. Financial reporting - accounting concepts.

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.


See also