CHAPTER 4 Measurement LEARNING OBJECTIVES After studying this chapter, you should be able to: 4.1 communicate the concept of measurement in the current context of financial reporting and demonstrate an understanding of its many benefits and limitations 4.2 reflect on the standard setters' approach to measurement and evaluate different measurement approaches 4.3 critically apply different measurement methods to evaluate the impact of measurement choice on the quality of accounting information 4.4 communicate and justify the controversial nature of fair value as a measurement approach and consider the arguments for and against a shift toward fair value under the accounting standards 4.5 reflect on the political nature of accounting measurement by developing an understanding of the different stakeholders in the financial reporting process 4.6 communicate the issues which contribute to the controversial nature of accounting measurement 4.7 reflect on current measurement challenges faced by the accounting profession with particular reference to environmental sustainability, green assets, intangible assets, heritage assets and water assets. Copyright @ 2017. Wiley. All rights reserved. Rankin, Michaela. Contemporary Issues in Accounting, 2nd Edition, Wiley, 2017. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/swin/detail.action?docID=5049576. Created from swin on 2021-05-31 03:06:42.
Framework and qualitative characteristics Accounting standards Historical cost Decision usefulness Quality of accounting information Choice of measurement base/approach in financial statements Current cost / replacement cost Fair value / net realisable value Management motivations and objectives Current economic conditions or other circumstances Present value Problems Additivity problem Mixed measurement model Flexibility Comparability Subjectivity Copyright @ 2017. Wiley. All rights reserved. Political nature of measurement, GFC, corporate collapse, sustainable development Intangible assets Current challenges/issues Heritage assets Social and environmental accounting and sustainability Accounting for water CHAPTER 4 Measurement 103 Rankin, Michaela. Contemporary Issues in Accounting, 2nd Edition, Wiley, 2017. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/swin/detail.action?docID=5049576. Created from swin on 2021-05-31 03:06:42.
From your previous studies in accounting you would have noted that different items are measured in different ways and we are often faced with a choice as to how we will measure a particular financial statement item. The accounting standard setters have adopted what we call a mixed measurement model when it comes to measurement in accounting. With a recent trend towards measurement of items at fair value, measurement has become very controversial. The political nature of accounting measurement has been highlighted in events such as the global financial crisis (GFC). This chapter considers the process of measurement, the benefits, issues and problems associated with the different measurement bases or approaches used in the financial statements, with a particular emphasis on the impact of measurement choice on the quality of accounting information produced. Specific measurement issues and current chal- lenges in accounting measurement are also considered. 4.1 Measurement in accounting LEARNING OBJECTIVE 4.1 Communicate the concept of measurement in the current context of financial reporting and demonstrate an understanding of its many benefits and limitations. The Blackwell Encyclopedic Dictionary of Accounting defines measurement as the act or system of measuring, where measuring can have a number of meanings. Measuring can be described as: ·