Measurement entering the 21st century: A clear or blocked road ahead?

• Published in: Australian accounting review Vol. 10; no. 2; p. 4
• Main Authors: Miller, Malcolm, Loftus, Janice A
• Format: Journal Article
• Language: English
• Published: Melbourne Australian Society of Certified Practising Accountants 01-07-2000
• Subjects: 21st century; Accounting consistency; Accounting standards; Current cost accounting; Exposure drafts; Fair value; Financial accounting standards; Financial reporting; Financial statements; Prices; Tax basis; Valuation; United Kingdom > UK; United States > US; Australia
• ISSN: 1035-6908; 1835-2561

While progress has been made in making financial statements more relevant by the inclusion of current value information, the piecemeal standard-by-standard approach has resulted in a lack of consistency in the specification of the valuation bases. At the international level there is disagreement between standard-setters on a unifying concept with advocates of value to the entity and advocates of fair value. No solution has been provided by the FASB's flight to fair value and rejection of entity-specific valuation. The mixed measurement system raises questions about reporting on financial performance. Re-measurement to fair value generates credits and debits that cannot be parked in the balance sheet and allowed to masquerade as assets and liabilities under the conceptual frameworks in the US, the UK and Australia. The piecemeal approach in building up the mixed measurement system has resulted in inconsistent treatment of valuation adjustments. The International Accounting Standards Committee has a high-level steering committee addressing the key issues related to financial performance and it will be interesting to see if they can facilitate the progressive swing to current value by providing a sensible framework within which to report value changes.