OPSIS: The Conceptual Framework neither specifies the objective or definition of
accounting measurement, nor provides a conceptual basis for choosing among
alternative measurement bases. This paper offers a starting point for developing
measurement concepts based on existing Framework concepts, including the objective
of financial reporting, the qualitative characteristics of useful financial information, and
the definitions of assets and liabilities. The paper focuses on subsequent measurement
of individual assets and liabilities and concludes that fair value measurement is more
consistent with existing concepts than either modified or unmodified historical cost.
Although unmodified historical cost is consistent with some concepts, modified historical
cost—which is widely used today—largely is not. Also, aggregate amounts, such as total
assets and total liabilities based on modified or unmodified historical cost, lack meaning.
Because financial statements include such aggregate amounts and changes in amounts
of individual assets and liabilities determine comprehensive income, measurement
concepts also need to contemplate these measurements.