THE PRUDENCE PRINCIPLE AND ECONOMIA AZIENDALE: A CONTRIBUTION TOWARDS RESOLVING THE IASB’S VARIATIONS

Abstract

This article explains the need for a dual application of prudence in administration and in
accounting by tracing the history of its meaning in economia aziendale up to the middle of
the nineteenth century. It shows that in the Italian theoretical context the prudence principle
developed in such a way as to provide criteria that might fit the evolving economic needs of
firms operating in an evolutionary context, as well as to satisfy the needs of different kinds of
stakeholders. The analysis suggests that emphasising prudence in accounting is a necessary
but not a sufficient condition for the achievement of the objective of general purpose financial
reporting. Indeed, more emphasis needs to be given also to the double application of prudence
in administration and in accounting to ensure activities are carried out in the interest of the
firm itself, and of all stakeholders.