Accounting Conservatism

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Dictionary Says

Definition of 'Accounting Conservatism'

A branch of accounting that requires a high degree of verification before making a legal claim to any profit. Accounting conservatism will recognize all probable losses as they are discovered and most expenditures as they are incurred. Revenue will be deferred until it is verified. Having strict revenue-recognition criteria is one of the most common forms of accounting conservatism.
Investopedia Says

Investopedia explains 'Accounting Conservatism'

Generally speaking, there are many accounting practices that are deemed conservative. For example, overestimating an allowance for doubtful accounts can give a more accurate picture of recoverable receivables given a specific economic outlook. This overestimate may lower earnings for a certain period, but it may be more accurate than if the original amount were used.
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'Accounting Conservatism'

  • Find Investment Quality In The Income Statement

    http://www.investopedia.com/articles/stocks/06/advincome.asp
    ... the income statement, investors need to be aware of two things related to a company's
    accounting practices. First, the degree of conservatism, which indicates ...

  • Financial Statements: Conclusion | Investopedia

    http://www.investopedia.com/university/financialstatements/financialstatements10.asp
    ... In regard to the two most popular financial statements, conservatism is implied
    by the following: ... Finally, US accounting rules are always in flux. ...

  • Analyze Cash Flow The Easy Way

    http://www.investopedia.com/articles/stocks/07/easycashflow.asp
    ... However, although accrual accounting provides a basis for matching revenues and
    expenses, this ... For the sake of conservatism, you can go one step further by ...

  • The Flow Of Company Information

    http://www.investopedia.com/articles/basics/07/flow_of_information.asp
    ... One can also get a feel for management's conservatism in giving guidance ... are audited
    for their adherence to generally accepted accounting principles (GAAP). ...

  • Is The US Government Too Big To Fail?

    http://www.investopedia.com/articles/economics/09/us-government-too-big-to-fail.asp
    ... The philosophy of monetary and resource conservatism has endured over the millennia,
    from agricultural to hunter-gatherer societies, for a reason. ...

  • The Swiss Franc: What Every Forex Trader Needs To Know

    http://www.investopedia.com/articles/forex/11/swiss-franc-primer.asp
    ... the world. Despite a long-held reputation for conservatism and prudence,
    the Swiss franc is not a common reserve currency. (For ...

  • DCF Analysis: Forecasting Free Cash Flows | Investopedia

    http://www.investopedia.com/university/dcf/dcf2.asp
    ... Therefore, as we did when forecasting revenues, we will err on the side of conservatism
    and assume that operating costs will show an increase as a percentage ...

  • DCF Analysis: The Forecast Period & Forecasting Revenue Growth ...

    http://www.investopedia.com/university/dcf/dcf1.asp
    ... We should err on the side of caution and conservatism and assume that The Widget
    Company's top line growth rate profile will commence at 20% for the first two ...

  • 4 Overlooked Homeownership Costs

    http://www.investopedia.com/articles/mortgages-real-estate/08/cost-of-owning.asp
    ... charge its inhabitants in property taxes 20 or 30 years down the road, would-be
    homeowners should seek out towns that have a history of financial conservatism. ...

  • Why Interest Coverage Matters To Investors

    http://www.investopedia.com/articles/basics/04/040804.asp
    ... However, such conservatism is not absolutely essential - it is acceptable to use
    the actual interest charges incurred during the year, even though this will ...

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