conservatism

(noun)

A risk-averse attitude or approach; for accounting purposes, it relates to disclosing expenses and losses incurred immediately and delaying the recognition of revenues and gains until realized.

Related Terms

Examples of conservatism in the following topics:

  • Gain Contingencies

    • The disclosure of gain contingencies is affected by the materiality concept and the conservatism constraint.

  • Recognition of Revenue Prior to Delivery

    • However, expected loss should be recognized fully and immediately due to the conservatism constraint.

  • Introduction to GAAP

    • Conservatism principle: when choosing between two solutions, the one that will be least likely to overstate assets and income should be picked.