Another form of bias that can skew financial results is when management owns a large stake in the company, and so has an interest in reporting optimistic results for the business, even though a more objective view would result in the reporting of more conservative results.īy using an objective viewpoint when constructing financial statements, the result should be financial information that the investment community can rely upon when evaluating the financial results, cash flows, and financial position of an entity. A more objective viewpoint would be to wait for more information before making such a determination. The principle was first enunciated by the French scientist Blaise Pascal. Principle is a noun used to refer to a scientific, moral, or legal rule or standard. Pascal’s principle, also called Pascal’s law, in fluid (gas or liquid) mechanics, statement that, in a fluid at rest in a closed container, a pressure change in one part is transmitted without loss to every portion of the fluid and to the walls of the container. It can also be used as an adjective to mean most important or primary. Credit: Lance Hayashida/Caltech The fundamental law comes into play in the quantum world because subatomic particles can behave like waves. Principal can be used as a noun to refer to a person in authority, the perpetrator of a crime, or the capital sum of a loan. The intent behind this principle is to keep the management team and the accounting department of an entity from producing financial statements that are slanted by their opinions and biases.įor example, if management believes that it will shortly be the beneficiary of a massive payout from a lawsuit, it may accrue the revenue associated with the payout, even though the evidence states that such an outcome might not occur. The uncertainty principle is a trade-off between two complementary variables, such as position and speed. This has three aspects: risk governance (risk assessment, management and communication), science-policy interfaces and the link between precaution and innovation.The objectivity principle is the concept that the financial statements of an organization be based on solid evidence. The precautionary principle is closely linked to governance. The application of the precautionary principle presents many opportunities as well as challenges. A cooperative is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs. Principal can be used as a noun to refer to a person in authority, the perpetrator of a crime, or the capital sum of a loan. Although most experts agree that the precautionary principle does not call for specific measures (such as a ban or reversal of the burden of proof), opinions are divided on the method for determining when to apply precautionary measures. Principles synonyms, Principles pronunciation, Principles translation, English dictionary definition of Principles. Different stakeholders, experts and jurisdictions apply different definitions of the principle, mainly depending on the degree of scientific uncertainty required for the authorities to take action. To others, it is an approach that protects human health and the environment. To some, it is unscientific and an obstacle to progress. The precautionary principle divides opinions. It first emerged during the 1970s and has since been enshrined in a number of international treaties on the environment, in the Treaty on the Functioning of the European Union and the national legislation of certain Member States. Most often related to subjects of morality or personal conduct, a principle is simply a fundamental rule used to influence action on the part of an. The precautionary principle enables decision-makers to adopt precautionary measures when scientific evidence about an environmental or human health hazard is uncertain and the stakes are high.
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