The Financial Accounting Standards Board (FASB) has completed the Measurement chapter of its Conceptual Framework for Financial Reporting.
Objective of the Measurement Chapter
The Measurement chapter provides guidance on how to measure the elements of financial statements (assets, liabilities, equity, revenues, and expenses) in a consistent and meaningful way.
Key Concepts of the Measurement Chapter
The Measurement chapter introduces the following key concepts:
- Measurement basis: The basis used to measure the elements of financial statements, such as historical cost, fair value, or current cost.
- Measurement uncertainty: The degree of uncertainty associated with the measurement of the elements of financial statements.
- Measurement error: The difference between the measured amount and the true amount of an element of financial statements.
Application of the Measurement Chapter
The Measurement chapter is applied in conjunction with the other chapters of the Conceptual Framework to develop accounting standards.
For example, the Measurement chapter provides guidance on how to measure the fair value of an asset. This guidance is used in the development of accounting standards for fair value measurement, such as FASB Statement No. 157, Fair Value Measurements.
Conclusion
The Measurement chapter is an important part of the Conceptual Framework. It provides guidance on how to measure the elements of financial statements in a consistent and meaningful way.
The Measurement chapter is used in the development of accounting standards and is essential for the preparation of financial statements that provide useful information to users.
Kind regards
G. Porter
