What guidance does the accounting constraint of conservatism and the ideas of conservatism offer?

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This is a difficult question to answer, because there are so many variables when it comes to the word conservatism. With that said, there probably two main principles of conservatism that would help.

First, conservatism does not like to take great risks. It does not want to be too levearged. The negative of this is that you might not make as much money when things go your way, but the positive side is that you will not lose a lot when things do not go your way. In this economic climate, I think we need to be more conservative.

Second, conservatism does not like too much government interference. It favors a market that is regulated more by the private sector without contraints. This is inherently helpful when it comes to businesses.


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