Global Standards for the world economy

Sunday 30 April 2017

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Measurement Objectives

Discussion Paper and Comment Letters


Discussion paper and comment letters

This Discussion Paper, prepared by staff of the Canadian Accounting Standards Board (AcSB), analyses possible bases for measuring assets and liabilities on initial recognition. The IASB published this paper on 17 November 2005 and the comment period closed on the 19 May 2005.

In April 2006, AcSB staff participated in roundtable discussions in Berlin, Brussels, and London to solicit comments on the Discussion Paper.

In September and October 2006, AcSB staff presented a summary of the comments received on the Discussion Paper to the IASB and FASB. That summary is available, click here. The majority of respondents were not in favour of the Discussion Paper’s overall proposals regarding the relevance of fair value on initial recognition and only a small minority supported the Discussion Paper’s proposals overall.

The most commonly cited reasons for disagreeing with the Discussion Paper’s proposals are outlined below:

Competing philosophies of financial accounting purposes


The Discussion Paper followed a conceptual approach, using the concepts in the existing IFRS framework to identify, evaluate, and develop possible measurement bases.

A significant number of respondents expressed concerns with the approach and believe that the Discussion Paper should have considered what an entity’s statement of financial position and financial performance should portray before addressing and proposing any conclusions on measurement issues.

In doing so, several respondents believe the concepts of management stewardship and capital maintenance should be explicitly considered.

Interpretation of relevance and reliability

Many respondents seemed to interpret relevance and reliability differently from the manner in which they are set out in the IFRS Framework and used in the Discussion Paper. Several respondents argued that fair value is not relevant, but their arguments seemed to be based on perceptions of lack of reliability. Some respondents believe that the Discussion Paper promoted relevance over reliability and therefore presented an unbalanced view.

Representation of fair value

The objective of fair value, as reasoned in the Discussion Paper, is to reflect the price of an asset or liability resulting from the consideration of market forces to determine an impartial and comparable value. Responses indicated some fundamental disagreements and uncertainties with respect to what “fair value” is and what it should purport to represent.

A majority of respondents agreed with the Discussion Paper that the objective of fair value should be to reflect market value. However, there was no firm agreement on what should be accepted to represent market value. Some interpreted the definition of “fair value” as the amount of any transaction between willing, arm’s length parties, irrespective of the existence of any market.Many respondents believe the Discussion Paper should have separately considered financial and non-financial assets and liabilities.

Accordingly, many respondents strongly believe that assets used in the production of goods and services and those acquired for resale be recognized at historical cost on initial recognition. Many respondents believe that historical cost should be used in these circumstances as the recoverability of these assets can be assessed through the entity’s business operations, rather than through sale.