Prudence Concept In Accounting Essay Sample

Prudence Concept In Accounting Essay Sample

… , shareholders and the media have all begun to more closely monitor the accounting for transactions. Today, more meticulous accounting policies are called for to avoid unwanted scrutiny especially in areas that are now on the radar screen of the Securities and Exchange Commission (SEC) such as restructuring charges, acquisition accounting, liabilities estimation, material events and revenue recognition. The SEC is becoming increasingly concerned with the over or under estimation of restructuring charges. The SEC is now taking a dim view of over estimates as a way for companies to immediately clean up their balance sheets to influence Wall Street’s …

… has been a practice that has been misused by some companies to place accruals in reserve accounts during favorable times and to withdraw from the accounts in lean times. Liability estimates have also been misused to misrepresent future earnings.The SEC has also recognized that some companies abuse the concept of materiality, a concept that was intended to build flexibility into financial reporting for insignificant items that are not worth measuring and reporting with exact precision. However, some companies have intentionally recorded errors within a defined percentage ceiling to impact their bottom-line performance. Finally, revenue recognition has become a …

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