Financial Accounting Standards Board

Financial Accounting Standards Board

According to the financial accounting standards board;
 Financial accounting measurements commonly use an observable amount that is market determined such as the current market value, cash paid for an asset, cash received by the organization and the current cost. In most cases accountants may use future cash flows that are estimated as the basis of measuring the cost of an asset or a liability.
 Financial statements offer a means for the use of future cash flows as accounting measurement basis at the initial recognition and for the fresh start measurements. They also provide the basic principles that govern the present value whose respective timings cannot be predicted.
 Capturing the economic difference between estimated future cash flows acts as the main reason of using the concept of present value in accounting measurements.
 Present value of an asset ought to provide and represent a bit of observable measurement characteristics of liabilities and assets so as to provide relevant financial reporting information.
 In the instances of the measurement of liabilities there are varying problems from those of assets but the underlying objectives involved are the same which is describing the methods for estimating the fair value of liabilities.
 The intention of financial accounting concepts is to set rules and objectives that can be the basis for the process of developing of financial reporting and accounting standards.
 The current accounting standards use a variety of different ways in indicating cash flow sets whereas present value measurement starts with a set of future cash flows.
 Uncertainty and risk are included in accounting measurements with the objective of initiating the market behavior towards assets and liabilities with the uncertain flows.
 Use of entity credits standing on fair value effect of particular liabilities mainly depend on the liability of the entity to pay and on liability provisions that protect holders.
 Indexing of cash flow instruments or close relating of the value of a particular financial asset to the values of the underlying liabilities is done in some financial instruments.