Conceptual Framework for Financial Reporting

Factors specific to initial measurement
Paragraphs 6.43–6.76 discuss factors to consider when selecting a
measurement basis, whether for initial recognition or subsequent
measurement. Paragraphs 6.78–6.82 discuss some additional factors to
consider at initial recognition.
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 be used subsequently, it is
also normally appropriate at initial recognition. Using the same measurement
basis for initial recognition and subsequent measurement avoids recognising
income or expenses at the time of the first subsequent measurement solely
because of a change in measurement basis (see paragraph 6.48).
When an entity acquires an asset, or incurs a liability, in exchange for
transferring another asset or liability as a result of a transaction on market
terms, the initial measure of the asset acquired, or the liability incurred,
determines whether any income or expenses arise from the transaction. When
an asset or liability is measured at cost, no income or expenses arise at initial
recognition, unless income or expenses arise from the derecognition of the
6.76
6.77
6.78
6.79
Conceptual Framework
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A79

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transferred asset or liability, or unless the asset is impaired or the liability is
onerous.
Assets may be acquired, or liabilities may be incurred, as a result of an event
that is not a transaction on market terms. For example:
(a)
the transaction price may be affected by relationships between the