Knowledgeable decisions that are made by outsiders who read financial reports are a result of the concept of conservatism.

Question

Quizplus · Accepted Answer

The concept of conservatism is a financial accounting principle that requires companies to record expenses and liabilities as soon as they are known, but to defer recording income and assets until they are realized. This principle is designed to ensure that financial statements are not overly optimistic and that companies do not overstate their financial performance. The concept of conservatism does not imply that knowledgeable decisions are made by outsiders who read financial reports.

Knowledgeable Decisions That Are Made by Outsiders Who Read Financial