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Measurements In Accounting Essay

630 words - 3 pages

1. Introduction
One purpose of financial reporting is to provide information that is useful in making business and economic decisions for internal and external users. The measurement plays a vital role in preparing a reliable and fair report cause it determines how the report shows the entity’s financial position and performance.

2. Measurement
2.1 Definition
The conceptual framework gives a definition of measurement: “Measurement is the process of determining the monetary amounts at which the elements of the financial statements are to be recognized and carried in the balance sheet and income statement. This involves the selection of the particular basis of measurement.” There are four ...view middle of the document...

When there are active markets, this measurement can be reliable.

2.3 Choose the measurement base
In financial reports, all measurements are expressed in monetary terms, and therefore regarded as measurements of values. However, the value of a particular asset may be measured by various ways, such as its historical cost or its market value. It does not means that any one of these measurements is the only one correct measurement. Therefore, if an entity wants to make the financial reports measured accurately and reflect its true position, proper choice of measurements is a crucial segment.

From the early release of the International Accounting Standards, the most measurements are in accordance with the historical cost basis, such as inventory, fixed assets and other criteria. One important reason is that these assets are measured at historical cost in accordance with both demands of the reliability and relevance. However, with the rapid development of economic in recent years, the greatly upgrading technology and...

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