Recognizing expected losses immediately, but deferring expected gains, is an example of:
A) Materiality.
B) Conservatism.
C) Cost-effectiveness.
D) Timeliness.

Question

Quizplus · Accepted Answer

This practice is an example of conservatism, which is a principle in accounting stating that losses should be recognized immediately, while gains should only be recognized when they are realized. This helps to ensure that financial statements are not overstated and are more conservative in nature.

Recognizing Expected Losses Immediately, but Deferring Expected Gains, Is an Example