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What is the underlying concept that supports the immediate recognition of a contingent loss?



A. Substance over form.
B. Conservatism.
C. Matching.
D. Consistency.
Asked by Filbert, Last updated: Jul 29, 2020

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John Smith

John Smith

Answered Sep 08, 2016

Conservatism.-under the conservatism constraint, when alternative accounting methods are appropriate, the one having the less favorable effect on net income and total assets is preferable. however, conservatism does not permit a deliberate understatement of total assets and net income. furthermore, sfac 5 describes a general tendency to emphasize purchase and sale transactions and to apply conservative procedures in accounting recognition. recognition of a contingent loss has a less favorable effect on net income than nonrecognition.
 

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