A Review of the Relationship between Conditional Conservatism and Trade Credit Mediated by the Role of Financial Crisis

Consistent with accounting standards, the major goal of financial statements and information disclosure is to provide users with useful information on the financial status and results of trade unit operations. This information is derived from various sources. Financial statements are transparent when they are characterized by accessibility, reliability, comprehensibility, relevance and timeliness. Financial statements constitute the main part of the financial reporting process. Financial statements are aimed at providing summarized and classified information on the financial status, financial performance and financial flexibility of the trade unit, which is made available for a large group of users of financial statements when economic measures are adopted. Therefore, accounting principles and procedures, backed by authorities developing accounting standards, use the concept of conservatism to balance managers’ optimism, protect the rights of the stakeholders and provide financial statements fairly. Conservatism in accounting refers to a method by which the recognition of proceeds and net assets are reduced in response to bad news, as the recognition of proceeds and net assets are not increased in response to good news. On the other hand, considering world developments and economic problems, countries are seeking ways to resolve their own economic problems through appropriate strategies. For this, one of the major strategies is to develop investment and increase trade credits. In the meantime, another way to appropriately use investment opportunities and better allocate the resources under critical conditions is to recognize factors that can help reduce financial crises. The present research aimed to investigate the relationship between conditional conservatism and trade credit mediated by the role of financial crisis, and to demonstrate that financial crises have a major and significant role in the relationship between conditional conservatism and trade credits.

Keywords:

conditional conservatism , trade credit , financial crisis