![]() Some readers may therefore find that the way a particular basis is described does not match how they understand it. ![]() Different people have different views on how each basis should work, and meanings evolve as practice changes. In reading the analyses that follow, the following comments should be borne in mind.īases of measurement in financial reporting are not carved in stone. The question of measurement costs is also considered briefly. The most important of these characteristics are generally considered to be relevance and faithful representation / reliability (older term).įor each basis, an outline is given of how it works and the relevance and faithful representation of the resulting measurements. However, in the absence of direct evidence on these matters, it is usual to argue in terms of various secondary characteristics that ought to be relevant in assessing the quality of information (see the key indicators in What is useful information?). In forming a judgment on the appropriateness of measurement bases, in literature, the overriding tests has been identified to be their cost-effectiveness and fitness for purpose. The last four are all forms of current value measurement. All these bases are forms of accrual accounting – that is, they are intended to measure income as it is earned and costs as they are incurred, as opposed to simply recording cash flows.
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