Practice question · True or false
Under the conservatism principle, gains should be anticipated and recognised early.
Hints
- The principle treats losses and gains asymmetrically.
- Only one of the two may be recognised before it is realised.
Show the answer
False
Why
Conservatism says anticipate losses, never gains. Recognise losses as soon as they are probable; recognise gains only when they are realized. This asymmetry keeps the balance sheet from overstating the firm's position.
Practise Accounting for Assets
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More questions on Accounting for Assets
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