7. Conceptual framework: Measurement Flashcards
1
Q
What are the four measurement basis in the IASB’s conceptual framework?
A
- Historical cost
- Current cost
- Fair value
- Value in use
2
Q
How do you measure assets at historical cost?
A
Assets stated at their cost
Less: Any amounts written off e.g depreciation
3
Q
What are five advantages of historical cost accounting?
A
- Easy to understand
- Straightforward to produce
- Free from bias
- Costs are reliable and can be tracked to invoices
- Don’t record gains until realised
4
Q
What are 3 disadvantages of Historical cost?
A
- Carrying amount is a lot lower than current value
- Inventory stated at value of purchase date not year end value
- ROCE is less meaningful
5
Q
What kind of price changes does Physical capital maintenance take into account?
A
Specific price changes
6
Q
What kind of price changes does Financial (real) capital maintenance take into account?
A
General price inflation
