Question Tag: Asset Measurement

Measurement of assets for recognition in the financial statements is a critical consideration in financial reporting and has been problematic in the public sector given the nature of assets involved. A public sector organization is currently in transition from cash basis accounting to accrual basis accounting which requires measurement and recognition of all assets in the general-purpose financial reports. Of much concern to the entity is how to select the appropriate measurement basis for the assets of the entity listed below to ensure that the objectives of financial reporting are achieved:

• Human resource software developed by the entity
• Stock of books in the library
• Vehicles donated to the entity

You have been consulted on the issues raised above to help the entity choose appropriate measurement for the recognition of the above-listed assets.

Required:
In line with the Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities issued by International Public Sector Accounting Standards Board (IPSASB):

i) Discuss the objective for the measurement of assets in financial statements that should guide the choice of measurement bases for asset recognition. (4 marks)

ii) Suggest an appropriate measurement basis for each of the assets indicated above, and discuss how your selected measurement basis meets the objectives of measurement in each case. (6 marks)