Is it Conservatism or Prudence?

Abstract

The purpose of financial statements is to provide information regarding the financial position, company performance and changes in financial position that are beneficial to a number of parties in decision making. Therefore, quality financial statement information is free from material misstatement. The impact of harmonizing financial accounting standards makes the wider spread of the concept of prudence more widespread. Researchers in this matter used literature studies to see how conservative concepts and prudence concepts in several countries. The concept of Prudence and the concept of conservatism are two contradictory things. From the results of the literature study, it was concluded that the concept of prudence would help financial reporting so as not to provide false optimism to users of information in the event of high uncertainty. Meanwhile, conservatives must be careful but if losses are recognized immediately. So, the concept of prudence is more transparent. However, the concept of prudence in developing countries has not been used differently from developed countries that have used prudence.