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EFRAG comments on the CICA research paper on financial reporting measurement issues

  • EFRAG (European Financial Reporting Advisory Group) (dk green) Image

25 Jan 2013

In June 2012, the Canadian institute of Chartered Accountants (CICA) posted to its website a reasearch paper "Toward a Measurement Framework for Financial Reporting by Profit-oriented Entities" to stimulate study and debate, and to provide input for the International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB). The European Financial Reporting Advisory Group (EFRAG) has commented on the paper.

In the CICA paper, a definition of current market value was put forward that embodies a set of properties that make it a most relevant measure of assets and liabilities for financial reporting purposes. Other measurement bases were evaluated as possible substitutes when current market value is not practicable of faithful representation.

EFRAG welcomes the work carried out by the CICA, however, EFRAG disagrees with the paper's conclusion that Current Market Value is the most ideal (relevant) measurement basis, when the value is practicable of faithful representation. Rather, EFRAG does not believe that it would be possible to identify a single ideal measurement basis.

EFRAG therefore concludes that "we think the role of a measurement framework should be to explain the properties of various measurement bases and by reference to users’ needs provide directions on when the different properties are important. In addition, it should provide directions on how to choose between alternative measurement bases when the most relevant basis would not result in assets and liabilities being practicable of faithful representation."

Please click to download the comment letter from the EFRAG website.

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