Solution 13.7


Measurement in financial statements


Chapter 6 of the statement of principles provides an overview of issues relevant to the measurement of assets and liabilities recognised in the balance sheet and the associated effects of gains and losses. In preparing financial statements, the measurement basis of historic cost or current cost needs to be selected for each category of asset or liability. An asset or liability measured using historic cost is recognised at its initial transaction cost. If measured on current value basis it is recognised at its current value at the time it was acquired. Re-measurement will occur if it is necessary to ensure that assets measured at historic cost are carried at the lower of cost and the recoverable amount. For assets measured at current value, re-measurement will occur to ensure that assets and liabilities are carried at up-to-date values. Re-measurement will only be recognised if there is sufficient evidence that the monetary value of the asset or liability has changed and the new value to the asset/liability can be measured with sufficient reliability.


The relevant accounting concepts are the