(Could be identified
(Could be identified
separately.)
separately.)
Impairment
Expenses arising
Reflected in income
Reflected in income
Expenses arising
because historical
and expenses from
and expenses from
because current cost
cost is no longer
changes in fair
changes in value in
is no longer
recoverable.
value.
use.
recoverable.
(Could be identified
(Could be identified
separately.)
separately.)
Value changes
Not recognised,
Reflected in income
Reflected in income
Income and
except to reflect an
and expenses from
and expenses from
expenses reflecting
impairment.
changes in fair
changes in value in
the effect of changes
value.
use.
in prices (holding
gains and holding
losses).
For financial assets,
income and
expenses from
changes in estimated
cash flows.
(a) This column summarises the information provided if value in use is used as a measurement basis. However, as noted
at 9.3.3.B below, value in use may not be a practical measurement basis for regular remeasurements.
(b) Income or expenses may arise on the initial recognition of an asset not acquired on market terms.
(c) Income or expenses may arise if the market in which an asset is acquired is different from the market that is the source of the prices used when measuring the fair value of the asset.
(d) Consumption of the asset is typically reported through cost of sales, depreciation or amortisation.
(e) Income received is often equal to the consideration received but will depend on the measurement basis used for any
related liability.
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Liabilities
Statement of financial position
Historical cost
Fair value
Fulfilment value
Current cost
(market-participant
(entity-specific
assumptions)
assumptions)
Carrying amount
Consideration
Price that would be
Present value of
Consideration (net of
received (net of
paid to transfer the
future cash flows that
transaction costs)
transaction costs) for
unfulfilled part of
will arise in fulfilling
that would be
taking on the
the liability (not
the unfulfilled part of
currently received for
unfulfilled part of the
including transaction
the liability
taking on the
liability, increased by
costs that would be
(including present
unfulfilled part of the
excess of estimated
incurred on
value of transaction
liability, increased by
cash outflows over
transfer).
costs to be incurred
excess of estimated
consideration
in fulfilment or
cash outflows over
received.
transfer).
that consideration.
(Includes interest
accrued on any
financing component.)
Statement(s) of financial performance
Event
Historical cost
Fair value
Fulfilment value
Current cost
(market-participant
(entity-specific
assumptions)
assumptions)
Initial recognition(a)
– Difference
between
Difference between
–
consideration
consideration
received and the fair
received and the
value of the
fulfilment value of
liability.(b)
the liability.
Transaction
costs
on Transaction costs on
incurring or taking
incurring or taking
on the liability.
on the liability.
Fulfilment of
Income equal to
Income equal to fair
Income equal to
Income equal to
the liability
historical cost of the
value of the liability
fulfilment value of
current cost of the
liability fulfilled
fulfilled.
the liability fulfilled.
liability fulfilled
(reflects historical
(reflects current
consideration).
consideration).
Expenses for costs
Expenses for costs
Expenses for costs
Expenses for costs
incurred in fulfilling
incurred in fulfilling
incurred in fulfilling
incurred in fulfilling
the liability.
the liability.
the liability.
the liability.
(Could be presented
(Could be presented
(Could be presented
(Could be presented
net or gross.)
net or gross. If gross,
net or gross. If gross,
net or gross. If gross,
historical
historical
historical
consideration could be
consideration could be
consideration could be
presented separately.)
presented separately.)
presented separately.)
The IASB’s Conceptual Framework
87
Transfer of
Income equal to
Income equal to fair
Income equal to
Income equal to
the liability
historical cost of the
value of the liability
fulfilment value of
current cost of the
liability transferred
transferred.
the liability
liability transferred
(reflects historical
transferred.
(reflects current
consideration).
consideration).
Expenses for costs
Expenses for costs
Expenses for costs
Expenses for costs
paid (including
paid (including
paid (including
paid (including
transaction costs) to
transaction costs) to
transaction costs) to
transaction costs) to
transfer the liability.
transfer the liability.
transfer the liability.
transfer the liability.
(Could be presented
(Could be presented
(Could be presented
(Could be presented
net or gross.)
; net or gross.)
net or gross.)
net or gross.)
Interest expenses
Interest expenses, at
Reflected in income
Reflected in income
Interest expenses, at
historical rates,
and expenses from
and expenses from
current rates.
updated if the liability
changes in fair
changes in
bears variable interest.
value.
fulfilment value.
(Could be identified
(Could be identified
separately.)
separately.)
Effect of events that
Expenses equal to
Reflected in income
Reflected in income
Expenses equal to
cause a liability to
the excess of the
and expenses from
and expenses from
the excess of the
become onerous
estimated cash
changes in fair
changes in
estimated cash
outflows over the
value.
fulfilment value.
outflows over the
historical cost of the
current cost of the
liability, or a
liability, or a
subsequent change
subsequent change
in that excess.
in that excess.
(Could be identified
(Could be identified
separately.)
separately.)
Value changes
Not recognised
Reflected in income
Reflected in income
Income and expenses
except to the extent
and expenses from
and expenses from
reflecting the effect
that the liability is
changes in fair
changes in
of changes in prices
onerous.
value.
fulfilment value.
(holding gains and
holding losses).
For financial
liabilities, income
and expenses from
changes in estimated
cash flows.
(a) Income or expenses may arise on the initial recognition of a liability incurred or taken on not on market terms.
(b) Income or expenses may arise if the market in which a liability is incurred or taken on is different from the market that is the source of the prices used when measuring the fair value of the liability.
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9.2.1 Historical
cost
Information provided by measuring an asset or liability at historical cost may be relevant
to users of financial statements, because historical cost uses information derived, at least
in part, from the price of the transaction or other event that gave rise to the asset or
liability. [CF 6.24].
Normally, if an entity acquired an asset in a recent transaction on market terms, the
entity expects that the asset will provide sufficient economic benefits that the entity will
at least recover the cost of the asset. Similarly, if a liability was incurred or taken on as
a result of a recent transaction on market terms, the entity expects that the value of the
obligation to transfer economic resources to fulfil the liability will normally be no more
than the value of the consideration received minus transaction costs. Hence, measuring
an asset or liability at historical cost in such cases provides relevant information about
both the asset or liability and the price of the transaction that gave rise to that asset or
liability. [CF 6.25].
Because historical cost is reduced to reflect consumption of an asset and its impairment,
the amount expected to be recovered from an asset measured at historical cost is at least
as great as its carrying amount. Similarly, because the historical cost of a liability is
increased when it becomes onerous, the value of the obligation to transfer the economic
resources needed to fulfil the liability is no more than the carrying amount of the
liability. [CF 6.26].
If an asset other than a financial asset is measured at historical cost, consumption or sale
of the asset, or of part of the asset, gives rise to an expense measured at the historical
cost of the asset, or of part of the asset, consumed or sold. [CF 6.27].
The expense arising from the sale of an asset is recognised at the same time as the
consideration for that sale is recognised as income. The difference between the income
and the expense is the margin resulting from the sale. Expenses arising from
consumption of an asset can be compared to related income to provide information
about margins. [CF 6.28].
Similarly, if a liability other than a financial liability was incurred or taken on in
exchange for consideration and is measured at historical cost, the fulfilment of all or
part of the liability gives rise to income measured at the value of the consideration
received for the part fulfilled. The difference between that income and the expenses
incurred in fulfilling the liability is the margin resulting from the fulfilment. [CF 6.29].
Information about the cost of assets sold or consumed, including goods and services
consumed immediately (see 7.2.1 above), and about the consideration received, may
have predictive value. That information can be used as an input in predicting future
margins from the future sale of goods (including goods not currently held by the entity)
and services and hence to assess the entity’s prospects for future net cash inflows. To
assess an entity’s prospects for future cash flows, users of financial statements often
focus on the entity’s prospects for generating future margins over many periods, not just
on its prospects for generating margins from goods already held. Income and expenses
measured at historical cost may also have confirmatory value because they may provide
feedback to users of financial statements about their previous predictions of cash flows
or of margins. Information about the cost of assets sold or consumed may also help in
The IASB’s Conceptual Framework
89
an assessment of how efficiently and effectively the entity’s management has discharged
its responsibilities to use the entity’s economic resources. [CF 6.30].
For similar reasons, information about interest earned on assets, and interest incurred
on liabilities, measured at amortised cost may have predictive and confirmatory value.
[CF 6.31].
9.2.2 Current
value
9.2.2.A Fair
value
Information provided by measuring assets and liabilities at fair value may have
predictive value because fair value reflects market participants’ current expectations
about the amount, timing and uncertainty of future cash flows. These expectations are
priced in a manner that reflects the current risk preferences of market participants. That
information may also have confirmatory value by providing feedback about previous
expectations. [CF 6.32].
Income and expenses reflecting market participants’ current expectations may have
some predictive value, because such income and expenses can be used as an input in
predicting future income an
d expenses. Such income and expenses may also help in an
assessment of how efficiently and effectively the entity’s management has discharged
its responsibilities to use the entity’s economic resources. [CF 6.33].
A change in the fair value of an asset or liability can result from various factors set out
in (a)-(e) at 9.1.2.A above. When those factors have different characteristics, identifying
separately income and expenses that result from those factors can provide useful
information to users of financial statements (see 10.2.3 below). [CF 6.34].
If an entity acquired an asset in one market and determines fair value using prices in a
different market (the market in which the entity would sell the asset), any difference
between the prices in those two markets is recognised as income when that fair value is
first determined. [CF 6.35].
Sale of an asset or transfer of a liability would normally be for consideration of an
amount similar to its fair value, if the transaction were to occur in the market that was
the source for the prices used when measuring that fair value. In those cases, if the asset
or liability is measured at fair value, the net income or net expenses arising at the time
of the sale or transfer would usually be small, unless the effect of transaction costs is
significant. [CF 6.36].
9.2.2.B
Value in use and fulfilment value
Value in use provides information about the present value of the estimated cash flows
from the use of an asset and from its ultimate disposal. This information may have
predictive value because it can be used in assessing the prospects for future net cash
inflows. [CF 6.37].
Fulfilment value provides information about the present value of the estimated cash
flows needed to fulfil a liability. Hence, fulfilment value may have predictive value,
particularly if the liability will be fulfilled, rather than transferred or settled by
negotiation. [CF 6.38].
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Updated estimates of value in use or fulfilment value, combined with information about
estimates of the amount, timing and uncertainty of future cash flows, may also have
confirmatory value because they provide feedback about previous estimates of value in
use or fulfilment value. [CF 6.39].
9.2.2.C Current
cost
Information about assets and liabilities measured at current cost may be relevant
because current cost reflects the cost at which an equivalent asset could be acquired or
International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards Page 19