Core Accounting Principles for Financial Statements

Going Concern Principle (Firm Start Operation)

It is considered that the management of the company has virtually unlimited duration. This is also called the "principle of continuous management." Consequently, the application of these principles will not be aimed at determining the value of assets for purposes of global or partial sale, or the amount resulting from a liquidation.

Accrual Basis

The imputation of income and expenditure must be based on the actual flow of goods and services they represent, regardless of when the resulting monetary or financial flow from them occurs. Accrual adjustments are based on these principles.

Principle of Uniformity

Once an approach is adopted in applying accounting principles among the alternatives allowed, it must be maintained over time and space. The election of that criterion should not be altered in either case. For example: Fixed Assets with a 10% annual depreciation quota vs. accelerated production rate at 15% annual depreciation.

Objectives of Uniformity

Reflection in the report: Considering the current international economic situation, the principle of uniformity in both criteria and methods facilitates or permits the achievement of three objectives:

• International Accounting Standards: Alignment with global requirements.
• Comparison: Uniformity of methods used to achieve a proper comparison between different companies.
• Consistency: Uniformity of methods used in the current year and earlier years.

Principle of Prudence

This principle states that only realized income is recorded on the date of the exercise. However, foreseeable liabilities and potential losses arising in the previous financial year or another must be counted as soon as they are known. These effects distinguish reversible or potential losses from those that are realized or irreversible. The prudent approach is closer to the mentality of the "pessimistic optimist," and carries a counterweight to the natural optimism of the entrepreneur toward their company.

No-Netting Principle

In no event may the assets and the liabilities, or costs and revenues that comprise the profit and loss account, be offset. The components of the various items of assets and liabilities are valued separately. The offsetting between accounts makes them difficult to verify.

Materiality Principle

This principle allows for the acceptance of some non-strict application of accounting principles, provided that the relative importance in quantitative terms of the variation that may occur is minimal and, therefore, does not significantly alter the annual accounts as expressing the true picture of the company.