Hi Max.Thanks so much for starting our discussion this week! You made an excellent point about the principle of conservatism! When some people hear that accountants are conservative, they may misconstrue it to assume that the accountants are intentionally understating accounts. However, this is not the case at all. It simply means that we stay on the side of caution and upon equally likely outcomes, we assume the one that is the least likely to overstate net income or net assets.

Class, what are your thoughts on conservatism as it relates to Earning Quality?