Editing Prudence (section)

== In accounting ==

In accounting, prudence was historically regarded as a fundamental principle for determining the appropriate timing of [[revenue recognition]].<ref>{{cite web|url=https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim31030|title=Tax and accountancy: concepts and pervasive principles|website=[[HMRC]] Business Income Manual}}</ref> The rule of prudence means that gains should not be anticipated unless their realisation was highly probable. However, recent developments in [[Generally Accepted Accounting Principles]] have led academic critics to accuse the International Standard-Setting Body, [[IASB]], of abandoning prudence.<ref>{{cite journal|first=Mario|last=Christodoulou|url=https://www.accountancyage.com/2010/08/24/iasb-has-abandoned-prudence-professor-warns/|title=IASB has abandoned prudence, professor warns|journal=[[Accountancy Age]]|date=24 August 2010}}</ref> In the [[Generally Accepted Accounting Practice (UK)|British reporting standard]] FRS 18, prudence, along with consistency, was relegated to a "desirable" quality of financial information rather than fundamental concept.<ref>{{cite web|url=http://www.hmrc.gov.uk/manuals/bimmanual/bim31032.htm|url-status=dead|archive-url=https://web.archive.org/web/20101022160758/http://www.hmrc.gov.uk/manuals/bimmanual/BIM31032.htm|archive-date=22 October 2010|title=Tax and accountancy: development of accountancy concepts and new objectives: FRS18|website=HMRC|access-date=2011-04-12}}</ref> Prudence was rejected for IFRS because it was seen as compromising accounts' neutrality.<ref name="Lords">{{cite journal|first=Rose|last=Orlik|url=https://www.accountancyage.com/2011/04/04/lords-took-a-leap-on-international-standards/|title=Lords took a leap on international standards|journal=[[Accountancy Age]]|date=4 April 2011|access-date=2011-04-12}}</ref>

In a 2011 report on the [[2008 financial crisis]], the British [[House of Lords]] bemoaned the demotion of prudence as a governing principle of accounting and [[Financial audit|audit]]. However, their comments were disputed by prominent practitioners.<ref name="Lords" />