Conservatism, in the accounting perspective, is the practice of disclosing all losses. An accountant should always avoid overstating assets and net income. A rule of thumb in accounting is to always be cautious. If a gain is probable and estimable, it’s still best not to disclose in the financial statements. However; if a loss is inevitable it’s best for an accountant to make the proper financial statement disclosures. Refer to contingencies for further information about losses and the recognition on financial statements.
