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ACCA Applied Skills · Financial Reporting · Recognition and measurement

Which of the following statements about measurement uncertainty and selecting a measurement basis is consistent with the Conceptual Framework?

A relevant measure that carries high measurement uncertainty can still be useful, but if the uncertainty is so large that the estimate no longer faithfully represents the item, another basis should be considered. Uncertainty is therefore weighed against relevance, not ignored or treated as an absolute bar.

  1. AA measure with a high level of measurement uncertainty cannot be used under any circumstances
  2. BMeasurement uncertainty is irrelevant if the measure is relevant to users
  3. CA relevant measure with high measurement uncertainty may still provide useful information, but might not faithfully represent the item if the uncertainty is too greatCorrect
  4. DMeasurement uncertainty only affects liabilities, not assets

Explanation

The Framework says that a high level of measurement uncertainty does not necessarily prevent use of a measure that provides relevant information, but in some cases the uncertainty is so high that the estimate may not give a sufficiently faithful representation. Therefore an outright ban is wrong, and ignoring uncertainty is also wrong.

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