Conceptual Framework for Financial Reporting

Factors to consider when selecting a measurement basis
In selecting a measurement basis for an asset or liability and for the related
income and expenses, it is necessary to consider the nature of the information
that the measurement basis will produce in both the statement of financial
position and the statement(s) of financial performance (see paragraphs
6.23–6.42 and Table 6.1), as well as other factors (see paragraphs 6.44–6.86).
In most cases, no single factor will determine which measurement basis
should be selected. The relative importance of each factor will depend on facts
and circumstances.
The information provided by a measurement basis must be useful to users of
financial statements. To achieve this, the information must be relevant and it
must faithfully represent what it purports to represent. In addition, the
information provided should be, as far as possible, comparable, verifiable,
timely and understandable.
6.43
6.44
6.45
Conceptual Framework
© IFRS Foundation
A73

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As explained in paragraph 2.21, the most efficient and effective process for
applying the fundamental qualitative characteristics would usually be to
identify the most relevant information about an economic phenomenon. If
that information is not available or cannot be provided in a way that faithfully
represents the economic phenomenon, the next most relevant type of
information is considered. Paragraphs 6.49–6.76 provide further discussion of
the role played by the qualitative characteristics in the selection of a
measurement basis.
The discussion in paragraphs 6.49–6.76 focuses on the factors to be considered
in selecting a measurement basis for recognised assets and recognised
liabilities. Some of that discussion may also apply in selecting a measurement
basis for information provided in the notes, for recognised or unrecognised
items.
Paragraphs 6.77–6.82 discuss additional factors to consider in selecting a
measurement basis on initial recognition. If the initial measurement basis is
inconsistent with the subsequent measurement basis, income and expenses
might be recognised at the time of the first subsequent measurement solely
because of the change in measurement basis. Recognising such income and
expenses might appear to depict a transaction or other event when, in fact, no
such transaction or event has occurred. Hence, the choice of measurement
basis for an asset or liability, and for the related income and expenses, is
determined by considering both initial measurement and subsequent
measurement.
Relevance
The relevance of information provided by a measurement basis for an asset or
liability and for the related income and expenses is affected by:
(a)
the characteristics of the asset or liability (see paragraphs 6.50–6.53);
and
(b)
how that asset or liability contributes to future cash flows (see
paragraphs 6.54–6.57).