ACCA Strategic Business Reporting (SBR) Practice Exam

What do the current value measurements include?

1. Present value and historical cost

2. Fair value, value in use, and current cost

3. Cost-based value and liquidated value

4. Nominal value and real value

The correct answer is: Fair value, value in use, and current cost

Current value measurements are essential for providing more relevant information for users of financial statements, reflecting current conditions rather than the historical cost basis. The correct answer references fair value, value in use, and current cost, which are the primary forms of current value measurements recognized in financial reporting. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This approach incorporates market conditions and is utilized extensively in various accounting standards, making it crucial for reflecting timely and relevant financial information. Value in use represents the present value of estimated future cash flows that are expected to be derived from an asset, considering its current condition and how it is expected to be used. This measurement is particularly important for impairment testing of assets. Current cost reflects the amount that would be paid to acquire an asset at present. It differs from historical cost by considering changes in prices and costs over time, thereby providing a more accurate depiction of the situation. These measures allow financial report users to assess the worth of assets and liabilities more appropriately in light of current market conditions and expectations, enhancing decision-making. Other choices reference measurements that do not align with the concept of current value. Historical cost focuses on past