Measurement |

Measurement introduction

Monetary terms

Elements recognised in financial statements are quantified in monetary terms. This requires the selection of a measurement basis. A measurement basis is an identified feature—for example, historical cost, current value, fair value or fulfilment value—of an item being measured. Applying a measurement basis to an asset or liability creates a measure for that asset or liability and for related income and expenses.

Different measurement bases

Consideration of the qualitative characteristics of useful financial information and of the cost constraint is likely to result in the selection of different measurement bases for different assets, liabilities, income and expenses.Measurement

Implementation of the measurement basis

A Standard may need to describe how to implement the measurement basis selected in Read more

More than one measurement basis

Sometimes, consideration of the factors described in Measurement choices for recording transaction may lead to the conclusion that more than one measurement basis is needed for an asset or liability and for related income and expenses in order to provide relevant information that faithfully represents both the entity’s financial position and its financial performance. More than one measurement basis

In most cases, the most understandable way to provide that information is:

  1. to use a single measurement basis both for the asset or liability in the statement of financial position and for related income and expenses in the statement(s) of financial performance; and More than one measurement basis
  2. to provide in the notes additional information applying a different measurement basis.

However, … Read more

Factors specific to initial measurement

Measurement choices for recording transactions discusses factors to consider when selecting a measurement basis, whether for initial recognition or subsequent measurement. Here some additional factors to consider at initial recognition are considered.

At initial recognition, the cost of an asset acquired, or of a liability incurred, as a result of an event that is a transaction on market terms is normally similar to its fair value at that date, unless transaction costs are significant. Nevertheless, even if those two amounts are similar, it is necessary to describe what measurement basis is used at initial recognition. If historical cost will be used subsequently, that measurement basis is also normally appropriate at initial recognition. Similarly, if a current value will … Read more

IFRS Measurement requirements

The Standards in International Financial Reporting Standards (IFRS) are one collection of financial reporting practices. They keep important because of the growing number of companies around the world (especially listed companies) that are required to comply with them, and the growing number of countries, that continue to model their own more general financial reporting requirements on them.

IFRS incorporates and builds on the accumulated, often inconsistent practical solutions devised by national standard-setters to deal with financial reporting problems that have emerged over many years, solutions which are in turn built on the accumulated business practices of centuries. IFRS is not a completely new and uniform approach to financial reporting, but the outcome of a long and continuing evolution.

Regarding measurement … Read more

Summary information provision by measurement bases

Use the hyperlinks to get more information, this is the table 6.1 from chapter 6 Measurement of the Conceptual Framework 2018.

Measurement involves assigning monetary amounts at which the elements of the financial statements are to be recognised and reported.

The IFRS Framework acknowledges that a variety of measurement bases are used today to different degrees and in varying combinations in financial statements, including:

  • Historical cost Summary information provision by measurement bases
  • Current cost Summary information provision by measurement bases
  • Net realisable (settlement) value Summary information provision by measurement bases
  • Present value (discounted) Summary information provision by measurement bases
Summary of information provided by particular measurement bases
Statement of Financial Position
EventHistorical costFair value (market-participant assumptions)
Read more

Some challenges in measurement bases for financial reporting

When applied to financial reporting the term measurement can give a misleading impression of certainty and objectivity. In daily life, measurements are typically made of the physical characteristics of physical objects – such as height, weight, temperature and so on. If accurate measurement tools are employed, information of this sort is objective and uncontroversial (a ‘fact’). The subjects of measurement in financial reporting, however, are abstract concepts of uncertain meaning such as income and net assets (an ‘estimate’). Some challenges in measurement bases for financial reporting

For this reason alone, their measurement is always liable to be controversial.

All measurements in financial reporting are expressed in monetary terms and therefore purport to be measurements of value. However, value can mean Read more