This report is intended to provide my commentary on the Exposure Draft Conceptual Framework for Financial Reporting as issued by the International Accounting Standard Board (IASB). In accounting, measurement is the process by which the value, size, and quality of various financial aspects are quantified. These measurements are presented in the financial statements in the form of assets, liabilities, equity, and income/expenses.

Factors to Consider When Selecting a Measurement Basis:

I agree with the Exposure Draft Conceptual Framework 2015 on 6.49, which specifies that, when selecting a measurement basis, the financial information provided must be relevant, faithfully represented, and - most significantly - comparable, verifiable, timely, and comprehensible. These standards provide a necessary level of guidance for accountants when producing high-quality financial statements that users can readily understand. For example, an ideal financial statement must propose financial information based on user's needs, and must be easily comprehensible for users. However, the Federation of Accounting Professions (Thailand) has recommended that the Conceptual Framework should also provide practical guidelines to address these concerns before discussing the factors.

The Exposure Draft has analysed the factors that might influence the accuracy of the information provided by a particular measurement basis, including:

1. How assets and liabilities affect future cash flows.

2. The characteristics of assets and liabilities.

3. Measurement uncertainty.

To simplify financial statement preparation, I suggest that we limit the number of factors considered in selecting an appropriate measurement basis. In this way, we can ensure that financial statements are relevant, easy to understand, and readily compared.

Selecting a measurement basis requires extensive analysis of various factors. However, this can create difficulty for both the preparer and users of financial statements. Different parties may disagree on what constitutes "important" considerations, particularly with regard to business activities that can be amended or modified at any time. For instance, non-financial statements can be sold as inventory, and businesses can hold financial assets to accumulate cash flows or to resell them. In their comment letter, the Federation of European Accountants acknowledged the importance of business activities in choosing a relevant measurement basis. Similarly, the European Securities and Market Authority agreed that the characteristics of assets and liabilities, as well as their effect on future cash flows, should be evaluated when selecting a measurement basis.

In summary, selecting an appropriate measurement basis must take into account a range of factors, including the relevance of the information provided, the accuracy of measurements, and the complexity of the financial statement. Accountants must work to ensure that financial statements are accurate, relevant, and useful to their intended users.

In Paragraph 6.55 of the ED, it was suggested that the level of measurement uncertainties should be taken into account when producing financial information. It is difficult to provide relevant information when there is a high level of uncertainty, especially when estimates are necessary. The UK Shareholders’ Association doubts that unobservable prices can be accurately represented through estimates and questions the reliability of information sources. The ED also suggested that using different measurement bases could produce more relevant information in high uncertainty situations, but this would require detailed explanation for user understandability.

I agree with the ED that perfect precision is not necessary for a faithful representation of financial information. It is reasonable to provide an explanation for errors rather than striving for unachievable precision. However, the UK Shareholders’ Association believes that explanations do not increase reliability and calls for a statement specifying the measurement basis for assets and liabilities to be the same or similar.

Enhancing qualitative characteristics is crucial for decision-making using financial data. The ED suggests that timeliness is not essential for measurement, but some users prioritize understandability over relevance. Parties agreed to reduce the number of measurement bases used for simplicity and understandability.

Using more than one relevant measurement basis may create understandability issues for non-professionals. Experts argue that multiple measurement bases can provide more useful information, but cost constraints must also be considered. Finding a balance between cost and benefit is crucial for organizations. Some disagree with considering cost constraints as it may limit the ability to provide useful financial information, while others agree that it should be taken into account.

In conclusion, producing reliable and relevant financial information is challenging and requires consideration of many factors, including measurement uncertainties, understandability, relevance, and cost constraints. Organizations must find a balance between these factors to provide useful financial information for decision-making.

Achieving accurate financial information representation relies on addressing measurement inconsistencies. While there may be disputes over the estimation of unobservable prices in the ED, it is important to consider the conflicts that arise from producing relevant and understandable information for different users of financial statements. A key factor in such conflicts is the number of relevant measurement bases used.

Moreover, the cost constraint is also crucial in selecting appropriate measurement bases, as they may impact the financial information's usability if they are financially taxing to produce.

To further investigate this issue, numerous organizations, including ACAG, CPA Australia, ESMA, FEE, the Federation of Accounting Professions Thailand, and Grant Thornton International, have submitted letters of comment regarding Exposure Draft ED/2015/3 Measurement.

Additionally, IASB has provided further insight on measurement in its Conceptual Framework for Financial Reporting, with Basis for Conclusions, Comment Letters, and the Exposure Draft available. Singapore Management University and UKSA have also submitted letters of comment on this topic.