On The Reasonable Application Of Conservatism Principle In Enterprises

[Abstract] reasonable application of conservatism principle can reasonably estimate the risks existing in the operation of enterprises, resolve them before risks occur, and play an early warning role in preventing risks. It is beneficial for enterprises to make correct business decisions, protect the interests of owners, and improve the market competitiveness of enterprises.

The principle of Conservatism: accelerated depreciation method; enterprise accounting standards; accounting uncertainty is the precondition of the existence of conservatism principle; accounting uncertainty refers to the final result of one or more situations and situations, which is the gain or loss, accounting information can only be recognized when one or more uncertain future events occur.

In our society, because of the continuous progress of science and technology and the rapid development of economy, the speed of information dissemination is faster and faster, resulting in the uncertainty of information in the accounting field.

但會計不確定性問題產生的原因可以歸納為兩個，一個是外因即由于會計系統外部環境的不斷變化而產生的會計信息的不確定性如企業的承諾，以及與銀行有關的資金借貸往來等信用，信用作為企業經營中一種必要的融通工具和交易保障，它是企業會計不確定性產生的一個重要原因；由于企業在外幣業務中匯兌期限的不同而發生的匯兌損益，企業無形資產的攤銷，合同生效的長短等也都會引起企業資產因時間的關系而不斷的變化；企業在生產經營中，為了謀取超額的經濟利益，就必然會存在著一定的風險性，由于這種風險性的存在，企業的會計信息中也就自然的存在著一種不確定性；另外，企業的生存與發展總是和社會，環境分不開的，那么會計信息就一定會受到稅率例率、物價變動指數、通貨膨脹等因素的影響，而使企業的資產不斷發生變化。

Another reason is the internal cause, that is, the uncertainty of accounting information caused by the uncertainty in the information processing process of the accounting system. For example, in accounting personnel's recognition, measurement, record and reporting, the accounting information of enterprises is constantly changing because of their own professional level or the quality of professional ethics.

In short, the uncertainty of accounting is directly related to the quality of accounting information. The quality of accounting information determines the inevitable existence of accounting uncertainty.

The general constraint factor of uncertainty has become the basis of the traditional accounting concept of conservatism. Generally speaking, the concept of conservatism is not a hypothesis or a constraint factor in accounting, but it is used as a constraint factor in displaying those data that may not be reliable and relevant.

Conservatism is an inevitable response to accounting uncertainty.

Accounting is a product of the combination of economy, technology and people. The existence of accounting uncertainty means the existence of risks. There are risks. People will naturally take measures to find a sound way to avoid risks and protect themselves.

The conservatism principle in accounting work is a method adopted by people.

For example, in the face of uncertainty in accounting work, property custodians, auditors and investors need to adopt conservatism principles in order to mitigate accountability, reduce audit responsibilities and avoid or mitigate investment risks and make reasonable and reasonable decisions.

To sum up, the existence of accounting uncertainty is a prerequisite for the existence of conservatism in accounting work.

Two, the application of the conservatism principle and the problems that should be paid attention to. (1) the application of the conservatism principle in accounting work is also called the prudence principle. It can be understood that it is a requirement for the accountants to choose the accounting treatment methods and procedures cautiously according to the uncertainty of accounting when considering the different accounting treatment methods and procedures of the accountants in some economic businesses or accounting matters.

In 1992, the Ministry of Finance issued the "enterprise accounting standards" and the sub industry accounting system and financial system, and made some provisions for the application of the conservatism principle, such as allowing bad debts to be prepared. In some industries, the accelerated depreciation method can be used to calculate depreciation of fixed assets.

However, with the gradual development and improvement of China's socialist market economic system, the above conservatism principle has been increasingly unable to meet the actual needs of the process and the requirements of modern development and international practice. Therefore, the application of the conservatism principle has been further adjusted and stipulated in the Limited by Share Ltd accounting system promulgated by the Ministry of Finance in January 27, 1998 and gradually revised specific accounting standards. Its specific applications can be summarized as follows: 1.

The accounting system of the Limited by Share Ltd stipulates that the final valuation of inventory and short-term investments may be based on the low cost and the market method, that is, the preparation of inventory depreciation and short-term investment depreciation, and the amount of the market price below the cost can be recognized as the current loss.

In addition, enterprises should check the book value of long-term investments regularly. If the market price continues to fall or the operating condition of the investment unit changes and so on, the recoverable amount is lower than the book value of the investment. The balance should be first offset against the capital reserve preparation of the investment, and the portion of the deficit should be recognized as the investment loss in the current period.

2. accelerate the adoption of depreciation method.

The accelerated depreciation method has been strictly regulated in the accounting system promulgated in 1992. The accounting system of joint-stock companies has not limited the scope of accelerated depreciation method, and enterprises can choose depreciation methods appropriately according to the nature and consumption mode of fixed assets.

The amortization of intangible assets 3..

The amortization of intangible assets is stipulated in specific guidelines and the accounting system of joint-stock companies, which is amortized according to the time limit stipulated in the contract or legal provisions and the period of operation. If the contract or law does not provide a fixed number of years, it shall be amortized for no more than 10 years, and the accounting system of the industry shall be amortized for no less than 10 years.

For the amortization of start-up costs, the accounting system of the industry shall be amortized for no less than 5 years. Instead, the Limited by Share Ltd accounting system and specific criteria shall be changed to an average amortization of no more than 5 years. If the start-up cost is not large, it can be amortized once a month in the production and operation period.

The accounting method of 4. investment.

"Accounting standards for enterprises 1 investment" stipulates that the long term equity investments acquired by abandoning non cash assets shall be determined according to the fair value of the non cash assets that have been waived. The fair value exceeds the difference in the book value of the non cash assets to be waived, and the amount of future income tax should be deducted as the capital reserve preparation. If the fair value of the equity investment obtained is clearer, the fair value of equity investment can also be determined.

When the equity investment is used in long-term investment equity investment, the investment cost of the investment enterprise should be equal to the equity investment difference between the owner's equity share of the invested enterprise, and the state regulations shall be amortized in a certain period of time, and the profits and losses shall be calculated.

The amortization period of the equity investment difference, the contract stipulates the investment period, is amortized according to the investment period; if there is no provision for the investment period, the investment cost exceeds the difference between the owner's equity share of the invested unit, and the investment cost is generally less than 10 years (including 10 years), and the investment cost is lower than the difference between the owner's equity share of the invested unit, and the amortization is generally not less than 10 years (including 10 years).

There are two totally different ways to deal with the value added and impairment of long-term investment equity investment and the amortization period of the long-term investment equity investment balance. It follows the conservatism principle.

The confirmation of 5. income (investment income).

In the industry accounting system, there are relatively simple, hard and superficial rules for the confirmation of income, such as "goods have been issued, labor services have been provided, and relevant documents have been received or have received payment".

The "accounting standard for enterprise income" stipulates the principle of income recognition and pays more attention to the economic nature of pactions.

For example, in the paction of commodity sales, enterprises are required to correctly judge whether the enterprise has pferred the main risks and rewards of the goods to the seller in essence; whether the enterprise has not reserved the right to continue management which is usually associated with ownership, nor does it control the sold goods; whether the economic benefits related to the business paction can flow into the enterprise; whether the relevant income and cost can be reliably measured.

Only when the sales of the enterprises satisfy the above four conditions can the revenue be recognized. Otherwise, if any condition is not satisfied, even if the payment is received or even the commodity has been issued, it will not be able to confirm the revenue.

On the date of the balance sheet, a reliable estimate of the result of the paction should be made, and the income should be confirmed according to the completion degree of the labor. If an enterprise can not make a reliable estimation of the result of the paction on the day of the balance sheet, it should confirm the income according to the labor cost that has been predicted to be able to compensate, and at the same time, carry forward the cost at the same cost; if the labor cost that has already occurred cannot be fully compensated, the income should be recognized according to the amount that can be compensated, and the cost of the labor cost will be turned down according to the labor cost already incurred. The amount of the recognized income is less than the difference in the labor cost that has occurred. It is recognized as a loss. If the expected labor cost is not compensated, the income will not be recognized, but the cost that has been incurred should be recognized as the current cost. For example, in the confirmation of the labor income provided by the enterprise, if the start and completion of the labor service belong to different accounting years,

It can be seen that the recognition principle of income stipulated in the enterprise accounting standards income is more robust and reliable.

The investment guidelines stipulate that in addition to receipt of cash dividends or interest receivable, the cash value or interest of short-term investments should be deducted from the actual value of the investment and not recognized as the current income.

(two) the problems that should be paid attention to in the practical application of the conservatism principle. The application of the 1. conservatism principle should correctly handle the conflicts with other accounting principles, such as objectivity, proportioning, comparability, relevance, reliability, accrual basis and so on.

For example, the objectivity principle is a reflection of the enterprise's financial situation and business results based on the actual economic operation in accounting work, but the principle of conservatism requires the recognition of losses, expenses or revenues and assets that may yet occur but not yet incurred in the accounting practice of enterprises.

In addition, the conservatism principle is very obvious in maintaining the interests of investors and enterprises. It promotes enterprises to adopt "prudent" behavior to achieve the established goal in various ways.

Therefore, it may lose its objective position.

Because of the above reasons, we should take some necessary measures and measures to alleviate the conflict in our economic activities.

First of all, we should reasonably determine the priority of accounting principles.

In the 12 accounting principles, the objectivity principle plays a leading role. The principle of conservatism must be carried out and applied on the basis of safeguarding the objectivity principle. For other accounting principles, because of the specific circumstances of different enterprises, we can make specific and reasonable determination according to the actual situation.

Secondly, we should give full disclosure to the conflict situation.

Because the uncertainty faced by every enterprise is different under different time and different business environment, the application time, scope and extent of the conservatism principle should also be different. Therefore, it is necessary for us to fully explain the time, scope and extent of the application of the conservatism principle in information disclosure, and reveal the degree of influence and the change of the enterprise's financial situation and business results due to the conflict with other accounting principles.

Sufficient information disclosure can effectively improve the comparability of information, so that the information users who have a good relationship with the enterprise can accurately grasp the financial situation of the enterprise, prevent the further deterioration of the conflict and mislead the users of the accounting information.

Thirdly, we need to restrict the application of the conservatism principle, so that we can reduce the randomness and subjectivity of the operation to a certain extent, and effectively prevent and avoid the conflict between the conservatism principle and other accounting principles.

Finally, we need to strengthen auditing supervision and strengthen internal restraint mechanism.

In view of the strong randomness and tendentiousness of the conservatism principle in practice, in order to avoid using the principle of prudence as a pretext, the company can arbitrarily change its accounting methods, overestimate losses, underestimate revenues, and falsifying costs and distortions.