Prudence is the inclusion of a degree of caution in the exercise of the judgements needed in making the estimates required under conditions of uncertainty, such that assets or income are not overstated and liabilities or expenses are not understated.
Prudence is specifically discussed in the IASB Framework for the Preparation and Presentation of Financial Statements.
Source: Glossary of Terms of IFRSs as at 31 December 2008.
