In 2010 the FASB removed conservatism from the conceptual framework citing its desire to achieve accounting neutrality. Prior to this decision it was widely believed that conservatism in accounting standards does not create a conservative bias in financial reporting and is instead necessary to achieving neutrality. Please explain why many academics and practitioners would argue for maintaining conservative financial reporting standards if the goal is to produce neutral/unbiased financial reports. Your answer should not simply define conservatism and explain why it can be desirable.

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Many academics and practitioners argue for maintaining conservative financial reporting standards even when aiming for neutrality or unbiased financia... View the full answer