Sbr (int/UK) Strategic Business Reporting

(1 mark) 

Measurement 

The Conceptual Framework outlines two broad measurement bases: historical 

cost, and current value (which includes fair value). 

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A measurement basis should be used that results in relevant information and a 

faithful representation. 

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Measurement uncertainly may prevent a faithful representation. However, fair 

value measurement results in no measurement uncertainty in this case 

because the financial asset is listed and its prices can be directly observed. 

 

  

(1 mark) 

When deciding on an appropriate measurement base, the Conceptual 

Framework states that consideration should be given to the characteristics of 

the asset (or liability) being measured, and the ways in which it contributes to 

an entity’s future cash flows. 

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Spamgate’s business model involves holding financial assets to maturity but 

also making some sales. Remeasuring the financial asset to fair value therefore 

informs users of the cash flows that may arise if the financial asset is sold, thus 

resulting in relevant information.