Measurement Monetary Value

Question: Discuss about theMeasurement for Monetary Value. Answer: The concept of relativism is a term given to an idea or ideas that argues that the truth is relative and it depends on the belief of the observer. In accounting, measurement is considered as a relative concept as it varies in different kinds, degrees, types and precisions. The process of measurement varies with respect of the frame of reverences. It is a fact that accounting measurements largely depends on the accounting intuition. Hence, it can be said that there is not any perfect measure of measurement. Thus, the concept of measurement is relative. Measurement is a crucial concept in the process of accounting. The process of determining the monetary value of the units is called the process of Measurement. It can be seen that there are different bases of measuring the financial value of the units. There are different kinds of method of measurement. In accounting, different bases of measurement are there. They are historical cost, current cost, realizable value, present value, deprival value and others (Domingues 2015). There are three fundamental principles in the concept of measurement. As pert the first principles, it is the objective of measurement to faithfully represent the most relevant value of the economic resources. As per the second principle, a particular measurement process depends on the effectiveness of the comprehensive income statement. As per the third principle, the cost of the measurement processes must be justifies by the benefits of them. It can be seen that there are some specific factors that need to be co nsidered at the time of the selection of the alternative measurement methods. They are value weighting, level of confidence, the measurement of similar items, the measurement of cash flow items, cost benefits and others. There are some major criteria that are used to evaluate the alternative measurement bases; they are usefulness of decisions, understandability, reliability, relevance, comparability and many others. In the concept of measurement, cost or benefits are considered as important, but they cannot be evaluated in the meaningful way (ifrs.org 2017). Many people all over the world mix up the concept of measurement with the concept of recognition. However, they both are different from each other. Measurement is the technique of the determination of the monetary value of a unit; but as per IASB framework, recognition is the process of incorporating an item in the balance sheet. The process of measurement is needed at the time of recognition of some financial items in the financial statements. Hence, it can be understood that there is a difference between the process of measurement and recognition. Significant independence can be seen in the process of measurement and recognition. Another important concept in measurement is re-measurement. The adoption of any measurement base always precludes some measurement bases. As per the objective of market value measurement, a business entity always looks for the market price of any asset of liability (Danjou and Walton 2012). An entity specific measurement objective always considers the mark et expectations and market risks. It can be seen that among all the measurement bases, the fair value method of measurement is the most popular methods among the accountants all over the world. As per the IASB guidelines, the measurement method under fair value helps to obtain more specific and relevant results. In the process of fair value measurement process, one can properly represent the values of financial statements (jstor.org 2017). One of the most interesting fact is that there is a method of Mixed Measurement model where historical cost method, fair value method and present value method is combined to get the expected results. Hence, from the above discussion, it can be said that measurement is an important concept in accounting. References Danjou, P. and Walton, P., 2012. The Legitimacy of the IASB.Accounting in Europe,9(1), pp.1-15. Domingues, A.M.N., 2015.Evaluation of financial assets and liabilities: a comparative approach(Doctoral dissertation, Instituto Superior de Economia e Gesto). ifrs.org. (2017).Measurement Bases for Financial Accounting Measurement on Initial Recognition. [online] Available at: https://www.ifrs.org/Current-Projects/IASB-Projects/Measurement-Objectives/Discussion-Paper-and-Comment-Letters/Documents/MeasurementBasesforFinancialAccountingDPshort.pdf [Accessed 20 Apr. 2017]. Jstor.org. (2017).Reliability and Objectivity of Accounting Measurements on JSTOR. [online] Available at: https://www.jstor.org/stable/244477?seq=1#page_scan_tab_contents [Accessed 20 Apr. 2017].