The conservatism constraint requires that, when there is any doubt, one should avoid understating assets and income.

Question

Quizplus · Accepted Answer

The conservatism constraint requires that, when there is any doubt, one should err on the side of caution and potentially overstate liabilities and expenses, rather than understating them. This is to ensure that financial statements do not overstate the financial health of a company and mislead investors and stakeholders.

The Conservatism Constraint Requires That, When There Is Any Doubt