CHAPTER FOUR

Discussing measurement

CERTAINLY, THE BASIS OF WHAT CURRENT FINANCIAL and business reporting uses, in good faith or for a particular purpose, is subject to discussion, if not criticism. Look at the well-considered opinions in Insight, Q3, 2007, the quarterly journal of the IASB – see www.ifrs.org/Archive/INSIGHT+journal/Q3+2007.htm. In this issue, there is an article entitled ‘Discussing measurement–Round tables provide the platform'. Obviously, any financial measurement is not a topic that wears thin with age, and it is worth reviewing.

The IASB and the FASB had, earlier that year, held joint round-table discussions in London, Norwalk (US) and Hong Kong (PRC) to discuss measurement as part of their ‘Conceptual framework' project. The open dialogue during the round tables provided an opportunity for interested parties to present their views on the project and to have an impact on the board's thinking at an early stage of the project.

To aid the round-table discussions, the IASB produced a coded mock-up of a balance sheet that illustrates the many different measurement methods in use today. For example, ‘other intangible assets' uses a mix of past entry price, amortised past price, allocated past entry price, combined past price, current exit price and value in use, as indicated by the different codes shown by lower case letters in parentheses. This balance sheet presentation is replicated in Figure 4.1, and a cursory view indicates the issues and challenges that exist in this regard.

FIGURE 4.1 XYZ Corporation balance sheet

XYZ Corporation

Statement of Financial Position as at 31 December 200X

This particular article concludes with a pertinent view, as follows:

The whole discussion certainly shows that the views on fair value measurement differ widely among preparers and users, but consensus exists on a general level. ‘There are not many advocates of fair value for everything', said Elizabeth Hickey, ‘or for historical cost for everything. But what we learned from the round tables is that most people want some historical values and some current values.'

To view the full summary report on the round tables, visit the Conceptual Framework project page at www.ifrs.org/Current+Projects/IASB+Projects/Conceptual+Framework/. Note that the project's overall objective is to create a sound foundation for future accounting standards that are principles-based, internally consistent and internationally converged.