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Description :
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This project is being undertaken because existing measurement standards and practices are inconsistent and a number of major measurement issues remain unsettled. The coverage of measurement in the Framework is limited and out of date. This project is to provide the IASB and its partner standard setters with a conceptual basis to revise and expand the measurement aspects of their conceptual frameworks.
In 2002, the IASB asked the Canadian Accounting Standards Board (AcSB) to carry out a research project on behalf of the IASB and its liaison standard-setting partners to undertake a preliminary investigation of alterative bases for measuring assets and liabilities that are recognized in financial statements.
On November 17, 2005, the IASB published the Discussion Paper, Measurement Bases for Financial Accounting — Measurement on Initial Recognition, prepared by the staff of the Canadian Accounting Standards Board. The IASB invites comments on the Discussion Paper by 19 May 2006.
The Discussion Paper, prepared by staff of the AcSB, analyses possible bases for measuring assets and liabilities on initial recognition. These include historical cost, current cost, fair value, net realisable value and value in use. The Discussion Paper also considers deprival value, which combines several measurement bases in a single model. The Discussion Paper evaluates the possible bases against criteria derived from the IASB Framework for the Preparation and Presentation of Financial Statements (Framework), as well as developments in finance theory, the application of present value and statistical probability principles and measurement practices.
The Discussion Paper concludes that fair value is more relevant than the other identified measurement bases on initial recognition and should be used provided it can be reliably measured. It acknowledges that significant uncertainty in measuring fair value exists in some common situations and considers which measurement bases are acceptable substitutes for fair value when fair value cannot be measured reliably on initial recognition. The Discussion Paper also proposes a four-level measurement hierarchy for assets and liabilities when they are initially recognized.
Comments received are analysed by staff of the AcSB. The analysis and copies of responses will be provided to the IASB so that they may be taken into account in its Concepts project when the IASB proceeds to debate the issues and form its preliminary views.
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