Measurement in Accounting
1.0 Introduction
The place of measurement is crucial in accounting. Measurement is vital to accountants for recording, summarising, reporting financial transactions and preparing financial statements that should indicate the true position of an entity.
However, accounting measurement issues are seen to be problematic as many measurements are derived.
According to Mary E. Barth (2007), an analysis regarding the latest activities of the International Accounting Standard Board (IASB) have revealed that the use of fair value as a measurement base in financial accounting is probable to increase. With the increased probability of using fair value as a measurement base and the adoption of international accounting standards by Australia, it would transform the way to which assets, including intangible assets, and liabilities of Australian entities are being measured.
This report first provides a discussion about role of measurement in accounting and the reasons as to why measurement issues are seen to be problematic. Thereafter, further examine the issue of using fair value as a measurement bases and the requirements in relation to Australia Accounting Standard Board (AASB) 138 intangible assets, as well as the effects of fair value on intangible assets.
2.0 Measurement
Critical roles of measurement exist in accounting. Within accounting, measurement is required for recognition, recording, summarising, reporting financial transactions and preparing financial statements. Financial reports that is “to provide information that is useful to present and potential investors and creditors and others in making investment, credit, and similar resource allocation decisions” (IASB, 2006a, para. OB2 cited in Barth, 2007). Therefore, it is crucial that the components of the financial reports are measured accurately to proper reflect the true position of the Australian entity.
2.1 Definition of Measurement
IASB paragraph 99, Framework for the Preparation and
The place of measurement is crucial in accounting. Measurement is vital to accountants for recording, summarising, reporting financial transactions and preparing financial statements that should indicate the true position of an entity.
However, accounting measurement issues are seen to be problematic as many measurements are derived.
According to Mary E. Barth (2007), an analysis regarding the latest activities of the International Accounting Standard Board (IASB) have revealed that the use of fair value as a measurement base in financial accounting is probable to increase. With the increased probability of using fair value as a measurement base and the adoption of international accounting standards by Australia, it would transform the way to which assets, including intangible assets, and liabilities of Australian entities are being measured.
This report first provides a discussion about role of measurement in accounting and the reasons as to why measurement issues are seen to be problematic. Thereafter, further examine the issue of using fair value as a measurement bases and the requirements in relation to Australia Accounting Standard Board (AASB) 138 intangible assets, as well as the effects of fair value on intangible assets.
2.0 Measurement
Critical roles of measurement exist in accounting. Within accounting, measurement is required for recognition, recording, summarising, reporting financial transactions and preparing financial statements. Financial reports that is “to provide information that is useful to present and potential investors and creditors and others in making investment, credit, and similar resource allocation decisions” (IASB, 2006a, para. OB2 cited in Barth, 2007). Therefore, it is crucial that the components of the financial reports are measured accurately to proper reflect the true position of the Australian entity.
2.1 Definition of Measurement
IASB paragraph 99, Framework for the Preparation and
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