Judgment in the context of accounting and financial reporting is the application of critical thinking and expertise to make decisions or interpretations related to complex accounting issues. These decisions can include recognizing revenue, valuing assets, estimating useful lives for depreciation, or assessing a company's liabilities. Making such judgments often involves considering a balance between different accounting principles, past experiences, and future outlooks.

For instance, when determining an allowance for doubtful accounts, a company exercises judgment on how likely it is to collect certain receivables. Similarly, when a firm decides on the fair value of a financial instrument, significant judgment is required to interpret market data or lack thereof. An example sentence might include: "The company showed sound judgment in disclosing the implications of uncertain tax positions in their financial statements."

Thus, judgment is an essential skill for accountants and finance professionals, particularly when there are no definitive rules or quantitative methods available, requiring reliance on their training, experience, and adherence to ethical standards.