Conservatism in accounting focuses on understating assets and revenues and overstating liabilities and expenses to provide a prudent and less risky portrayal of a company's financial position. In business, it refers to a cautious and careful attitude, typically avoiding excessive risk. In politics, conservatism promotes limited government spending and lower taxes.
The 'Lower of Cost or Market (LCM)' principle is a conservative accounting convention that dictates that inventory should be reported at either its historical cost or its current market price, whichever is lower.
