Introduction
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, 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.
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.
A Standard may need to describe how to implement the measurement basis
selected in that Standard. That description could include:
(a)
specifying techniques that may or must be
used to estimate a measure
applying a particular measurement basis;
(b)
specifying a simplified measurement approach that is likely to provide
information similar to that provided by a preferred measurement
basis; or
(c)
explaining how
to modify a measurement basis, for example, by
excluding from the fulfilment value of a liability the effect of the
possibility that the entity may fail to fulfil that liability (own credit
risk).
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