MANIPULATING PRUDENCE IN THE SELL OFF OF THE BUSINESS PREMISES OF MANUFRANCE (1970s-1980s)

Abstract

This article examines how prudence can be manipulated when it is translated into an accounting
principle. The purpose of conservatism is to support the sustainable growth of industrial
companies by reporting assets at the lower end of the range of reasonable values. Based on
an in-depth study of Manufrance, a large French industrial company, we describe and analyze
how conservatism could be manipulated and diverted from its original purpose. We particularly demonstrate how under-estimating Manufrance’s real estate assets led to opportunistic
short-term profits and, eventually, the collapse of the company.