Chapter 1 - Measurement Basis

Question 1

• Historical Cost

Answer 1

• Provides monetary information about assets, liabilities and related income and expenses
• Historical cost doesn’t reflect changes in values except for impairment and increases in liabilities

Question 2

• Current Value

FAIR VALUE

Answer 2

The price that would be received to sell an asset, or paid to transfer a liability in an orderly transaction between two market participants on the measurement date.

Question 3

• Current Value

VALUE IN USE

Answer 3

The present value of future cash flows or other economic benefits, that an entity expects to receive from the use of an asset and its ultimate disposal.

Question 4

• Current Value

CURRENT COST

Answer 4

• The current cost of an equivalent asset at the measurement date plus the transaction costs
• The current cost of a liability is the consideration received for an equivalent liability at the measurement date less costs incurred