reaps a variety of criticisms from standard compilers
including academics.
Hsieh, Ma, and Novoselov conducted research on
accounting conservatism. Hsieh, Ma, and Novoselov
want to see whether accounting conservatism can be
explained in a rational way to ambiguity. Companies
that face financial reports with greater ambiguity,
the company is more conservative. Hsieh, Ma, and
Novoselov in their research looked at companies of
two types of strategies namely "prospector" and
"Defender". Companies whose strategy models are
"Defender" will focus on utilizing existing
resources, and companies whose strategy models are
"Prospector" will look for new business
opportunities. The results of his research are that
companies that face greater report ambiguity will be
more conservative. (Hsieh, Ma and Novoselov,
2018).
Within the conceptual framework, the concept of
prudence must be maintained. The French
Accounting Standards Authority and the Australian
Accounting Standards Board (AASB) do not agree
with reintroduction. The concept of prudence in
financial reporting is permitted, where it will be
useful for the need to protect the interests of
investors in financial reporting. And, this also
applies internationally and European countries.
According to Măciucă, Hlaciuc and Ursache that as
long as company management does not use the
concept of prudence to maintain income or hidden
reserves, prudence and other concepts will create a
strong foundation for financial reporting. Therefore,
the concept of prudence will not conflict with the
neutrality of financial statements. Prudence
accounting behavior is the quality of accountants in
understanding the details of the basic accounting
principles relating to asset valuation and profit
measurement. (Măciucă, Hlaciuc and Ursache,
2015)
Geimechi and Khodabakhshi conducted research
on the Tehran Stock Exchange and considered the
size of the company based on assets. The results of
Geimechi and Khodabakhshi's research that there is
no influence of company size on the concept of
conservatism, discretionary accruals do not affect
conservatism. the existence of the concept of
conservatism is recommended in financial
statements for the benefit of investors. (Geimechi
and Khodabakhshi, 2015).
Amanamah and Owusu conducted research on
the Ghana Stock Exchange. Accountants in Ghana
are of the view that measurement based on fair value
is useful, especially with regard to financial
reporting. There is no active capital market for the
recognition of certain assets facing many problems
during implementation. In Ghana, there is no need
for proper, quality and skilled assessment. And, it is
not necessary for the Supervisory Board to help
assess certain assets. Ghana's capital markets are
inefficient to support fair value measurements. This
is due to the challenges for developing countries
where capital markets are inefficient in terms of
conducting prudence concepts that must apply fair
value. Ghana Stock Exchange is an inactive capital
market for certain assets, lack of professional
judgment and regulators.(Amanamah and Owusu,
2016).
Bahadır, Demir, and Öncel conducted a study of
90 companies listing on Turkey Stock Exchange.
The application of IFRS is believed to be able to
improve financial reporting by increasing the
comparability, quality, and transparency of financial
statements. However, the lack of guidance on IFRS
implementation, inadequate sectors in adopting
regulations and difficulties in applying the concept
of fair value which is considered a major challenge
for the implementation of IFRS in Turkey. (Bahadır,
Demir and Öncel, 2016).
Smart planning can provide benefits to
companies that may already have global
competitors. It is recommended that corporate
entities in Nigeria must adapt to International
Financial Reporting Standards rather than complete
adoption of standards. (Okoye and Akenbor, 2014).
The impact of harmonizing financial accounting
standards (the application of IFRS, GAAP, and
IAS), making the spread of fair value more
widespread, means that the spread of the concept of
prudence is also wider. The historical cost system,
which is a conservative concept, is very popular in
the European Union. The concept of prudence and
fair value will make the capital market more
transparent. But it has never been seen how this
concept of prudence in developing countries (such as
central and eastern Europe). For asset revaluation
during financial ratio analysis, the ratio is not too
sensitive to the application of the revaluation model
but is very sensitive to the application of the fair
value model. (Strouhal, 2015).
5 CONCLUSION
The concept of prudence will be able to help
financial reporting so as not to give false optimism
to users of information in the event of high
uncertainty. The concept of prudence is only for
general guidelines. In the end, use the best judgment
Is it Conservatism or Prudence?
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