Shedding Light on the Prediction Financial Distress: The Power of Prudence in Financial Reporting

Research Aims: This study aims to test and analyze the effect of Accounting Prudence on Financial Distress. Design/methodology/approach: This study uses a quantitative method with secondary data from financial reports, annual reports, sustainability reports, and other supporting sources. The researnesch population includes non-financial sector companies listed on the Indonesia Stock Exchange (IDX), with samples selected purposively based on certain criteria. The observation period runs from 2018 to 2021. Research Findings: Based on the result of the test shows that the large number of companies that experience bankruptcy when there is economic uncertainty in Indonesia, so companies need to consider the following accounting prudence as an assessment of predicting financial distress. Theoretical Contribution/Originality: This research develops a financial distress prediction model by applying the principle of prudence as an evaluation tool. This model is expected to increase the accuracy in assessing the potential financial distress of the company. Keywords: Accounting Prudence, Financial Distress, Financial Report, Leverage, Company Size.