1, in order to offset the excessive optimism of managers and owners. Entrepreneurs are naturally optimistic about the companies they run, but the deteriorating living environment of enterprises and the pressure of accounting information users on truth and fairness force accountants to constantly resist the tendency of being too optimistic in the report. Therefore, many traditional accounting beliefs still retain traces of conservatism and penetrate into today's accounting practice.
2. For investors (owners or shareholders), it is more dangerous to exaggerate profits or overestimate values than to understate them. Because the consequences of loss or bankruptcy are more serious than those of profit. Therefore, when the consequences are different, the accounting rules for measuring and recognizing losses should not be consistent with those for measuring and recognizing gains, and it is unreasonable to choose the same measurement basis or plan.
3. Accountants have much more internal information than the information transmitted to investors or creditors. Faced with reported risks that may prove untrue in the future and unreported risks that may prove true in the future, we must make relatively accurate and conservative estimates in order to try to weigh the possibility of risks.
When we construct the theoretical system of accounting principles, we should still retain or recognize the conservatism principle, but we should revise it to overcome its inherent disadvantages. That is to say, accounting matters should be considered comprehensively, and the most possible accounting estimates should be selected as objectively as possible for confirmation and measurement.