Measurement uncertainty

Measurement uncertainty – Uncertainty that arises when the result of applying a measurement basis is imprecise and can be determined only with a range.

Measurement uncertainty arises when a measure cannot be determined directly by observing prices in an active market and must instead be estimated.

The level of measurement uncertainty associated with a particular measurement basis may affect whether information provided by that measurement basis provides a faithful representation of an entity’s financial position and financial performance. A high level of measurement uncertainty does not necessarily prevent the use of a measurement basis that provides relevant information.

However, in some cases the level of measurement uncertainty is so high that information provided by a measurement basis might not provide … Read more

Fair value measurement

Fair Value Measurement can present significant challenges for preparers of financial statements, particularly because it involves using judgment and estimation. Further, it is the market participant view that shapes fair value, so preparers need to monitor whether the valuation models and assumptions they use for financial reporting appropriately reflect those of market participants.

Fair Value Measurement under IFRS 13:Fair value measurement

  1. defines fair value;
  2. sets out in a single IFRS a framework for measuring fair value; and
  3. requires disclosures about fair value measurements.

The definition of fair value focuses on assets and liabilities because they are a primary subject of accounting measurement. In addition, IFRS 13 is applied to an entity’s own equity instruments measured at fair value.

The … Read more

Retrospective or prospective application

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Retrospective or prospective application

Retrospective or prospective application


Retrospective application – Applying a new accounting policy to transactions, other events, and conditions as if that policy had always been applied (change in accounting policy) (IAS 8 5).


Correcting the recognition, measurement and disclosure of amounts of elements of financial statements as if a prior period error had never occurred.

Prospective application of a change in accounting policy and of recognising the effect of a change in an accounting estimate, respectively, are:

  1. Applying the new accounting policy to transactions, other events and conditions occurring after the date as at which the policy is changed; and
  2. Recognising the effect of the change in the accounting
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Cash accounting

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Cash accounting – IFRS only accepts accounting for financial reporting on an accrual basis, see below. [IAS 1 27] However, tax authorities sometimes allow (smaller) entrepreneurs to prepare Financial Statements for tax filing purposes on a cash basis.

The cash basis is much simpler, but its financial statement results can be very misleading in the short run. Under this easy approach, revenue is recorded when cash is received (no matter when it is earned), and expenses are recognised when paid (no matter when incurred).

So this means that  income will be recorded when the company receives cash and expenses are recorded when they are actually paid out and not when the bill is raised.

Cash accounting Cash accounting Cash accounting Cash accounting Cash accounting

There … Read more

Accrual accounting

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There are two basic type of accounting methodologies – one is cash accounting and the other is accrual accounting. Accrual accounting depicts the effects of transactions and other events and circumstances on a reporting entity’s economic resources and claims in the periods in which those effects occur, even if the resulting cash receipts and payments occur in a different period. IFRS requires using accrual accounting (IAS 1 27). Accrual accounting is more complex than cash accounting, cash accounting may sometimes be used for tax return accounting for small businesses.

This is important because information about a reporting entity’s economic resources and claims and changes in its economic resources and claims during a period provides a … Read more

Conceptual framework 2018 Measurements

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Conceptual framework 2018 measurements is part of the explanations on the revised Conceptual Framework for Financial Reporting (the Conceptual Framework 2018) issued in 2018 by IASB. It describes various measurement bases, the information they provide and factors to consider when selecting a measurement basis. The 2010 Conceptual Framework did not include much guidance on measurement.Conceptual framework 2018 Measurements

 Conceptual Framework 2018Conceptual framework 2018 Measurements

The concepts developed in the Conceptual Framework 2018 are: Conceptual framework 2018 Measurements

  1. The objective of financial reporting Conceptual framework 2018 Measurements
  2. Qualitative characteristics of useful financial information Conceptual framework 2018 Measurements
  3. Financial statements and the reporting entity Conceptual framework 2018 Measurements
  4. The elements of financial statements Conceptual framework 2018 Measurements
  5. Recognition and derecognition Conceptual
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More than one measurement basis

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More than one measurement basisSometimes, 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
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Factors specific to initial measurement

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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 … Read more

IFRS Measurement requirements

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IFRS Measurement requirements – The Standards in International Financial Reporting Standards (IFRS) are one collection of financial reporting practices. They stay 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 … Read more

Summary information provision by measurement bases

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Summary information provision by measurement basesSummary 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
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