Measurement Bases for Financial Reporting

Paper Summary:

The paper relates that the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have decided to revise their conceptual frameworks for financial reporting and accounting. The paper notes that, ideally, the present framework of both boards will be broader and expansive so as to develop a conceptual framework, which both Boards can use as an outline for new and revised accounting standards. The paper explains that one key area that is affected is the basis of measurement and its effect on financial reporting. The paper then proceeds to evaluate the different ways that measurement is defined within the conceptual framework. The paper also analyzes the methodologies identified so that choices made in the future can be based on valid recommendations.

Outline:
Introduction
Measurement and Bases of Measurement
Criticisms
Objectives of Financial Reporting and the Bases Choice: Is there a Trade-Off
What Bases Should be Chosen?
Conclusion

From the Paper:

"Measurement in financial reporting is therefore dependent on a lot of external factors to the organization; which affect the process of integrating it within the conceptual framework of the IASB/FASB. Bullen and Crook (2006) states that measurement will continue to be one of the most challenging aspects of the conceptual framework since neither bodies have a clear cut definition as to what are the necessary bases that should be used nor are there a set of refined guidelines for the use of any bases. The definitions of both bodies are vague, and as such the conceptual framework continues to produce a vague definition."

Sample of Sources Used:

• Accounting Standards Board. 2006a, 'Accounting Standards Board: Measurement in Financial Reporting', Accounting Standards Board Discussion Roundtables. Available at http://www.frc.org.uk/documents/pagemanager/asb/Summary%20of%20points%20made%20in%20discussion%2024.4.06.pdf
• Accounting Standards Board. 2006b, 'Measurement Bases for Financial Reporting: Background Paper', Accounting Standards Board. Available at http://www.frc.org.uk/documents/pagemanager/asb/ASB%20Measurement%20Paper.pdf
• Borio, C. and Tsatsaronis, K. 2006, 'Risk in Financial Reporting: Status, Challenges, and Suggested Directions', Bank of International Settlements: Monetary and Economic Department, 213, August. Available at http://www.bis.org/publ/work213.pdf
• Bromwich, M. 2006, 'Economic Perspective on Accounting Measurement', Accounting Standards Board, April. Available at http://www.frc.org.uk/documents/pagemanager/asb/Presentation%20Bromwich.ppt
• Bullen, H. & Crook, B. 2005, 'Revisiting concepts', Financial Accounting Standards Board and International Accounting Standards Board, May. Available at http://www.fasb.org/articles&reports/revisiting_the_concepts_may_05.pdf

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