The US’ Financial Accounting Standards Board (FASB) has issued a new chapter of its Conceptual Framework related to the measurement of items recognised in financial statements.

The Conceptual Framework is a body of interrelated objectives and fundamentals that provides the FASB with a tool as it sets standards. A Statement of Financial Accounting Concepts is nonauthoritative and does not establish or change Generally Accepted Accounting Principles

The chapter becomes Chapter 6 of FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting, and represents the completion of the FASB’s Conceptual Framework.

FASB chair Richard Jones said: “The publication of Chapter 6 completes the FASB’s Conceptual Framework—an important tool used by the Board in our decisions. We thank the FASB members, staff, and stakeholders whose input helped us achieve this milestone, one that’s been several decades in the making.”

The final chapter is similar to the rest of the framework in that it establishes concepts that the Board would consider in developing standards of financial accounting and reporting. It provides the Board with a framework for developing standards that meet the objective of financial reporting and enhance the understandability of information for existing and potential investors, lenders, donors, and other resource providers of a reporting entity.

The chapter provides concepts for the Board to consider when choosing a measurement system for an asset or a liability recognised in general purpose financial statements. It describes:

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  1. Two relevant and representationally faithful measurement systems: the entry price system and the exit price system and
  2. Considerations when selecting a measurement system.