What is conditional conservatism

These ideas are not new.Indeed they were common sense until recently.The goal of this study is to introduce a model for firms'Gains in reported earnings has, since its origins, been a peculiar characteristic of the accounting system.Understanding conservatism's role, its determinants, and its variations across firms is important for interpreting the nature.Basu's [the conservatism principle and the asymmetric timeliness of earnings. journal of accounting and economics 24 (1997):

However, many subsequent studies cast doubt on the extent to which basu's measure captures conditional conservatism versus statistical biases or.It is the collective wisdom of conservatives such as evans.Accounting conservatism refers to financial reporting guidelines that require accountants to exercise a high degree of verification and utilize solutions that show the least aggressive numbers when faced with uncertainty.Conditional conservatism is the consequence of accounting that reflects bad news sooner and more completely than good news.Using a sample of firms that disclose material weaknesses (mws) in internal controls under the sarbanes oxley act (sox), we find a positive relation between internal control quality and.