a) In your own words, explain what you understand by the term 'prudence'. How can an 'asymmetrically prudent' accounting treatment lead to the understatement of income in one period but an overstatement in future periods?
b) Do you agree with the board's tentative decision to reintroduce an explicit reference to the notior of prudence (described as caution when making judgements under conditions of uncertainty)? Justify your answer.