The Prudence Principle in the Accounting Regulations Applicable to the Economic Entities
Author:
Georgeta PETRE, Ph. D., Alexandra LAZĂR, Ph. D
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DOI:
Keywords:
annual financial statements, true and fair view, prudence, accounting loss, value adjustments, provisions
Abstract:
In accordance with Accounting Regulations compliant to the European Directives, approved by the Minister of Public Finance Order no. 3055/2009, applicable to the economic entities, the items presented in the annual financial statements are evaluated on the base of general accounting principles, one of them being the prudence principle. \r\nIn conformity with this principle, when the annual financial statements are prepared, the evaluation must be made on a prudent basis. This means that assets and income can not be overestimated, and liabilities and charges - underestimated.\r\nIn accordance with Accounting law no. 82/1991, republished, and accounting regulations applicable, the annual financial statements represent official documents for submitting the financial and economic situation of the entity, witch should provide a true and fair view of financial position, financial performance and other informations regarding its activity. \r\nThrough the statement accompanying the annual financial statements, the administrators confirm that those statements give a true and fair view of financial position, financial performance and other informations regarding the activity performed. It is important, in this regard, that the balance sheet items represent the accounting informations, put in relation to the real value of assets, liabilities and equity, established at the inventory date. \r\n