Economic stability Economic stability Avoid Financial Overstating Accounting conservatism leads companies to lower the value of assets and income and increase the value of liabilities and expenses. This reuces the possibility of companies “embellishing” their financial reports with overly optimistic figures. Thus, financial reports better reflect the company’s financial reality. . Reuce the risk of manipulation The principle of conservatism helps reuce the risk of manipulation of financial statements by company management. When management tends to lower estimates, it is more difficult for them to manipulate financial statements for personal or corporate interests.
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Provide more creible information Accounting conservatism allows financial reports to provide more creible information to stakeholders, such as investors, creitors and regulators. Stakeholders can have greater confidence that the report is not tailore in Lebanon Mobile Number List a way that is detrimental to them. . Improve Early Warning In situations of uncertainty or unstable economic change, accounting conservatism can provide early warning of financial problems.
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This allows stakeholders to take necessary actions early, which can reuce the risk of greater losses in the future. . Encourage Accountability Accounting conservatism encourages accountability among company management. Management must be more careful China WhatsApp Number List in making estimates and managing risk, because they know that financial statements will reflect a conservative approach. . Supports Public Trust Accounting conservatism helps maintain public trust in financial markets and financial institutions.
