Prudence

Prudence is caution when making judgements under uncertainty, supporting neutrality. For example, use a supportable estimate of an uncertain expense rather than selecting an artificially low amount to improve profit. Caution applies to both assets and liabilities and is intended to prevent bias, not to build hidden reserves. For a doubtful receivable, use an evidence-based allowance rather than ignoring a plausible loss. Equally, do not invent an unsupported extra loss to depress current profit.