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The argument in this paper is that financial accounting is inherently conservative, in that a neutral application of the International Accounting Standards Board (IASB's) definition of (net) assets leads to book value being less than economic value. There are both conceptual and practical reasons for this outcome, neither of which is explained by an intention to be conservative, by an asymmetry or bias that is designed to lead to a conservative outcome. Financial accounting is not a system for the neutral measurement of economic value. Book value and economic value are instead conceptually different, with conservatism resulting from that difference. This inherent conservatism seems to have been overlooked both by the IASB and by its critics. The IASB has sought to remove prudence from its framework and has attracted criticism from the academic and practitioner communities for doing so. Yet the challenges to the framework implied by adopting an agency-based, contracting demand for prudent accounting are criticisms of a problem that for the most part does not exist
