Introduction

According to Procházka (2009), accounting elements measurement is one of the crucial

factors in the process of preparing financial statements, which fairly present economic activity of
an accounting entity. Elements of financial statements can be measured by various attributes,
corresponding to the nature of the element and the purpose for which the element has been
incurred by the entity.

After 2006:
The support for FV gradually declines within the International Accounting Standard
Board (IASB)
 The proposed revision of IAS 37 (Provisions, Contingent Liabilities and Contingent
Assets) and the revenue recognition project moved away from proposing FV for
measuring obligations.
 The new standard on financial instruments (IFRS 9, IASB 2009 onwards) continued the
mixed measurement approach of IAS 39 (Financial Instruments: Recognition and
Measurement), with historical cost as the basis for measuring securities held to maturity.
 The evolving revision of the Conceptual Framework did not advocate FV as the ideal
measurement base. Instead, it was proposed to clarify a number of alternative
measurement bases that could be used in financial reports, each being potentially relevant
in appropriate
Why did IASB’s retreat from FV as a preferred measurement base?
 Opposition from preparers of accounts had led to re-deliberation of a number of the
IASB’s exposure drafts and discussion papers.
 The changing composition of the IASB board .
 The changes in the IASB board membership reflected deeper changes in its parent body
and its governance and supervision of the IASB.

These developments were the outcome of the regular reviews required by the constitution of the
Foundation and designed to enable the IASB to adapt to changing circumstances.
Argument against FV as the universal measurement objective
  Well-developed markets suitable for providing reliable selling prices were less prevalent
in some of the newly adopting countries.
 Different styles of corporate governance in some newly adopting countries may have
required less emphasis on reporting to stock market investors rather than providing
stewardship information to existing shareholders.

During the late 2007, Global Financial Crisis (GFC)

 The use of FV adding volatility to the banking system.
 Given under the appropriate circumstances, FV valuation could amplify a collapse of
liquidity when there is an interaction between the banking reserve requirements,
 Number of researchers argued that there is no convincing evidence for the view that FV
added significantly to the GFC.

However, the GFC did damage the confidence of delivering reliable FV measures for financial
reporting that had been thought to be most suitable measurement for financial instruments.