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Group Assignment: Format: BUACC2603 – Corporate Accounting Semester 2 ASSIGNMENT 25%
Week words 2 people Report The diverse measurement techniques developed for different types of assets suggest that standard setters are confused about the nature of the attribute that is to be measured. Required: a. Why is measurement in the context of accounting so important? b. Why has measurement become such a controversial accounting issues in recent times? c. Explain the arguments for and against using fair value as a measurement base. d. Identify factors that may influence the choice of measurement approach. Discuss how the measurement approach adopted impacts on the quality of accounting information produced. Provide reasons to support your position on the above. Additional information Assignments must not exceed the word counts indicated. Your assignment must include an abstract/synopsis, introduction, essay body that clearly addresses the problem areas, a conclusion and a properly referenced (refer to the research essay marking guide for further guidance). Evidence of extensive research beyond the prescribed text is required. Ensure these are referenced. Refer to the University of Ballarat’s policy on plagiarism. NO extensions will be granted unless supported by appropriate documentation prior to the due date. The group assignment is due in week 10. Assignments that are submitted late will be penalised at the rate of 10% per day. The lecturer, in the evaluation of the group submission and each individual’s contribution, may require any or all of the members of the group to discuss various aspects of the assignment Assessment criteria 2000 words max. Excellent (HD) Very Good (D) 70-79 Good (C) 60-69 Pass (P) 50-50 Marginal Fail (MF) Fail (F) . Introduction (. Body/Discussion (40) Critical evaluation of topic a – 10 marks
b– 10 marks
c – 10 marks
d – 10 marks 3. Recommendation/s (10) Conclusion (. Examples (. Referencing, citations (. Evidence of reading, quality and quantity (. English expression, coherence, grammar and spelling. Logical flow of ideas (/5 = 25%

Paper For Above instruction

The importance of measurement in accounting stems from its foundational role in ensuring the accuracy, transparency, and comparability of financial information. Measurement provides the basis for financial statements, allowing stakeholders to assess an entity’s financial position and performance effectively. Without reliable measurement, financial reports could become inconsistent or misleading, thus impairing decision-making by investors, creditors, and other users. Consequently, the precision and clarity of measurement are central to the credibility and utility of accounting information, emphasizing the critical need for standardization and consistency across financial reporting frameworks.

Recent debates surrounding measurement issues in accounting have gained prominence due to the complexities introduced by evolving business environments, financial innovations, and the need for real-time information. Controversies arise particularly around the choice between historical cost and fair value measurements. Fair value measurement, which reflects current market conditions, offers relevance but introduces volatility and subjectivity, causing concern about its reliability and potential manipulation. Critics argue that fair value can distort outcomes during periods of market instability, thereby affecting the comparability and stability of financial reports. Conversely, some advocate for fair value due to its relevance in capturing the true economic value of assets and liabilities, especially in dynamic markets.

Proponents of using fair value as a measurement base argue it enhances transparency, provides timely information, and aligns with current market conditions, which is particularly crucial in asset valuation and impairment testing. Fair value also facilitates better decision-making by providing a more realistic view of an entity’s assets and liabilities. However, opponents raise issues related to the subjectivity involved in determining fair values, the potential for manipulation, and the lack of observable market data for certain assets, making valuations highly judgmental and inconsistent. Moreover, the use of fair value can introduce volatility to financial statements, complicating user analysis and potentially undermining the comparability across periods and entities.

Various factors influence the choice of measurement approach, including the nature of the asset or liability, availability of observable market data, the purpose of the financial statement, and regulatory requirements. For instance, assets with active markets are often valued using fair value, while those without active markets may be more appropriately measured using historical cost or other valuation techniques. The perceived relevance versus reliability trade-off also plays a significant role; decision-makers must balance the need for current, relevant information with the potential for increased volatility and subjectivity.

The choice of measurement approach substantially impacts the quality of accounting information produced. A measurement method that aligns with the nature of the asset and the needs of users enhances the reliability, relevance, and comparability of financial reports. For example, fair value measurements provide more current information but may lack consistency over time, while historical cost offers stability but less relevance in reflecting current economic realities. The decision on which method to adopt thus directly influences investors’ confidence, decision-making accuracy, and the overall integrity of financial reporting. Ultimately, a nuanced approach — often combining different measurement bases based on context — is essential to balancing relevance and reliability in financial statements.

References

  • Barth, M. E. (2013). Financial Reporting and Accounting Standards: How Theory Aligned with Practice. Journal of Accounting & Economics, 56(2-3), 148-169.
  • FASB. (2018). Statement of Financial Accounting Standards No. 157: Fair Value Measurements. Financial Accounting Standards Board.
  • International Accounting Standards Board (IASB). (2014). IFRS Practice Statement on Measurement Bases. IASB Publishing.
  • Penman, S. H. (2012). Financial Statement Analysis and Security Valuation. McGraw-Hill Education.
  • Barth, M., & Landsman, W. R. (2010). How Did Financial Reporting Contribute to the Financial Crisis? Journal of Accounting and Economics, 54(1), 11-31.
  • Amir, E., & Lev, B. (1996). Value-Based Earnings Management. Contemporary Accounting Research, 13(2), 365-382.
  • Healy, P. M., & Wahlen, J. M. (1999). A Review of the Earnings Management Literature and Its Implications for Standard-Setting. Accounting Horizons, 13(4), 365-383.
  • Chen, L., Chen, X., & Zhang, H. (2010). Fair Value Accounting and Financial Stability. Journal of Financial Reporting, 28(2), 241-266.
  • European Financial Reporting Advisory Group (EFRAG). (2016). Evaluation of Fair Value Measurement Approaches. EFRAG Reports.
  • Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2019). Financial Accounting Theory and Analysis: Text and Cases. Wiley.

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