Historical cost measurement

The historical cost of an asset is the amount paid for it and the historical cost of a liability is the amount received in respect of it or the amount expected to be paid to satisfy it.

Historical cost accounting is interpreted to require that the amount at which an asset is stated in the accounts should not exceed the amount expected to be recovered from either its use or its sale (its recoverable amount). Historical cost as it is … Continue reading

Realisable value measurement

An asset’s realisable value is the amount for which it could be sold, and a liability’s realisable value is the amount for which it could be settled. Realisable value measurements are often made on a net basis, and here realisable value will be considered in the sense of net realisable value; that is, net of selling costs (for assets) and grossed up for settlement costs (for liabilities). As the actual use of realisable value is limited, it … Continue reading

The Role of Financial Reporting

How does financial reporting information fit into business? Financial reporting ultimately serves a number of different desired outcomes. One of these is economic growth. It does not promote growth directly; instead, growth is promoted through a number of subordinate outcomes. One of these could be described as good business performance. This in turn is promoted through subordinate outcomes that could be described as good business decisions and good management. Financial reporting information is one type of information that … Continue reading