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Measurement Model For PPE: A Case Study

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6.0 Measurement Model
In our opinion, measurement model not specified by the IASB for PPE could not provide a more useful information to existing and potential investors in comparison to the models listed in the IFRS. This is supported by its mission to serve the public interest by promoting trust, growth, and long-term financial stability in the global economy. Our opinion can also be further supported with our findings as below.
Fair Value Model
This model is allowed by the IASB to measure Investment Property but not PPE. Fair value model is where an asset is revalued at market value without calculating depreciation and impairment. In accounting, there is such thing as matching principle. In terms of assets, this is where depreciation is matched with the revenue generated by the asset in the same accounting period (Ramanna, …show more content…

Based on ratios analysed earlier, it is proven that depreciation will affects the revenue generation as it reduces the initial assets’ cost. Depreciation policy used becomes one of the factors that cause the variation in company’s value. Next, general purpose of financial reporting will be more effective only when IASB itself does not determine the depreciation rate and useful life since economic benefits’ pattern, assets’ quality and economic factors which related to the PPE’s nature may vary for each other. Lastly, it is believed that other measurement models that are not listed by IASB are not effective to be used since they do not provide enough information to the financial information’s user. The investors may face the difficulties in making judgement whether to invest or not into the company. Overall, we recommend that the companies that involve in specialized industry such as oil and gas to implement straight line method which have been approved by IASB as their depreciation policy for their

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