The conservatism constraint requires that when more than one estimate of the amounts to be received or paid in the future exists and these estimates are about equally likely, then the less optimistic amount is used.

Question

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The statement accurately describes the conservatism constraint, which is a principle in accounting that requires companies to be cautious and avoid overstating their financial position. When there are multiple estimates for future amounts, and no estimate is more likely than the others, the conservative estimate should be chosen. This means selecting the lower estimate, the estimate that recognizes the least amount of revenue, or the highest estimate for expenses.

The Conservatism Constraint Requires That When More Than One Estimate