Question

1. Why is it important for entities to disclose the measurement bases used in preparing the financial
statements?

2.Can an asset that is not realisable within 12 months be classified as a current asset? If so, under
what circumstances?

Answer 1

Q1 It is important for entities to disclose the measurement bases used in preparing the financial
statements because the Accounting Standards permit various alternatives – like cost or fair value for
the property, plant and equipment. Thus the users need to know that what alternatives the entity
will have chosen so as to understand how the items are measured and for the purposes of the comparison with
the financial statements of another entities.

Q2 In case the operating cycle of the company is more than 12 months then the asset can be classified as current assets even if they are realisable after 12 months