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ACCA Applied Skills · Financial Reporting · Recognition and measurement

Which of the following statements about the effect of a measurement basis on the statement of profit or loss is consistent with the Conceptual Framework?

When choosing a measurement basis, the relevance of the income and expenses it produces in the statement of financial performance must be considered alongside the relevance of the asset or liability measure itself. The basis therefore affects both primary statements, not just the statement of financial position.

  1. AThe selected measurement basis affects only the statement of financial position
  2. BWhen selecting a basis, the relevance of the resulting income and expenses must be considered as well as the relevance of the asset or liability measureCorrect
  3. CIncome and expenses are always measured on the same basis as the related asset, so no separate consideration is needed
  4. DChanges in value must always be recognised in profit or loss whatever the basis

Explanation

The Framework requires consideration of the information the measurement basis produces in both the statement of financial position and the statement of financial performance. Hence the effect on income and expenses is a factor. Statements that it affects only the balance sheet, or that separate consideration is never needed, are incorrect; some changes in value go to other comprehensive income.

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