Financial measurement of asset bases and liabilities is one of the most confusing and subjective areas within corporate accounting. With the introduction and implementation of fair value standards and in the wake of the 2008 crisis, the fair value standards and rules have been a source of a lot of debate and discussion within the financial community. We will discuss the major features of the same in this report.
Importance of measurement
One of the basic underlying facets of accounting is the type of measurements done on the various assets and other items on the financial statements like balance sheet, profit and loss statement etc. Measurement techniques refer to the way that the underlying item is measured with respect to the value that should be recorded in the financial statements against the item being measured. The aim of any financial statement being prepared is to give accurate information about the financial position of the organization to all the concerned stakeholders of the organization like the shareholders, creditors, suppliers etc. But, more often than not, the financial statements are used by the management to provide positive financial news of the organization as much as possible. This is done by dressing up the financial statements to reduce losses and to show increased cash flows and revenues for the organization. It is also usually achieved by showing increased bottom lines through non-recurring one off sources of income which are reported after the normal operating sources of income on the income statement of the organization.