Which of the following statements is true regarding the conservatism principle?

The conservatism principle in accounting is centered on presenting a cautious approach when dealing with estimates and uncertainties. This principle favors the recognition of expenses and liabilities promptly, while gains and revenues should only be recognized when they are realized or assured.

Under this principle, expenses should indeed be recorded when they are probable. This means that if an obligation or cost is likely to occur, it should be recognized in the financial statements, ensuring that the financial position is not overestimated. This approach helps to give a more reliable and conservative view of the company's financial health by not prematurely recognizing incomes that may never be realized.

The other statements do not align with the conservatism principle in the same way. For instance, reporting gains as they occur contradicts the principle that emphasizes caution and the deferral of gains until they can be reliably measured. Recognizing losses only when certain does not fully reflect the conservative approach because the principle acknowledges the need to recognize potential losses as likely. Lastly, understating liabilities when possible goes against the principle of presenting a truthful and complete picture of a company's obligations.