First argue that the prudence concept makes it possible

of all, the conservative concept is designed to counteract the optimism of some
managers. Its use prevents an overstatement of performance and financial
position (Atrill and McLaney, 2016). For
instance, to counter the loss of income from debts, an allowance for bad debts
is established. This adjusts the accounts receivable to the amount expected to
be returned, thus preventing the overestimation of current assets. Basu (1997) interpreted
conservatism as resulting in earnings reflecting ‘bad news’ more quickly than
‘good news’ – suggesting that greater emphasis is put on loses that earnings. Despite
this, Barker and McGeachin’s (2015) research coupled with the literary
documentation perspective provides strong evidence that the prudence concept is
essential to making accounting based decisions: if IASB’s Conceptual Framework
and the substantial requirements of IFRS would reconcile given the uncertainty of
real life circumstances, such an
agreement would re-locate accounting standards as central to the practice of
accounting conservatism. In fact, a study conducted by
Hu, Li and Zhang (2014) has found that the conservative principle has a
positive impact on the improvement of corporate information environment in 43 countries,
confirming that the principle is to be noted as a valuable aspect of financial information
even though the majority of critics believe that most Generally Accepted
Accounting Principles (GAAP) are outdated. In addition to the statements made
previously, we can further argue that the prudence concept makes it possible to
compare financial information. Not only does it serve to reinforce another
principle, the faithful representation one but also amplifies the relevance of
the financial statement and then evaluate a company’s position against its