Two Concepts for Economic Cautiousness in the European Union Cover Image

Две концепции за счетоводна предпазливост в Европейския съюз
Two Concepts for Economic Cautiousness in the European Union

Author(s): Nedyalka Alexandrova
Subject(s): Economy, Supranational / Global Economy, Accounting - Business Administration
Published by: Университет за национално и световно стопанство (УНСС)
Keywords: Accounting conservatism; Conceptual Framework for Financial Reporting; financial reporting; prudence principle;
Summary/Abstract: There are two spheres of regulation in the EU legislative framework regarding the accounting – at first, Directive 2013/34/EU and on the other side - Regulation (EC) No 1606/2002 on the application of international accounting standards. Directive 2013/34/EU oversees the traditional understanding and strict compliance with the prudence concept by all accountancy scholars and practitioners on continental Europe. On the other hand, a key role to understand the philosophy of the International accounting standards plays the Conceptual Framework for Financial Reporting which is not officially accepted in the EU but it defines basic terms, principles and concepts. The latest update of the Conceptual Framework was in March 2018. The prudence principle was brought back to the document (as it was removed back in 2010). In this report the author claims that the prudence concept highlighted in the Directive 2013/34/EU and in the Conceptual Framework for Financial Reporting, hence in the International accounting standards, does not have same implication which is because of different philosophical foundations.