A research note

Abstract

The paper contributes to the research agenda of studies on accounting measurement by suggesting that incremental change is taking place in IFRS which has the effect of moving recognition of assets and liabilities to an earlier point in the transaction cycle. This is manifested in recognition of executory contracts and changes in economic state in some standards. The professional debate about fair value obscures the underlying boundary shift. Fair value is used to simulate completion of the transaction cycle. The use of fair value in this way is accompanied by a change in emphasis as to how reliability should be construed, with representational faithfulness being advanced over verifiability. The recognition of income and expense earlier in the cycle is corrected on final realization, so the overall profits or losses of the entity are not changed, although recognition may take place in different periods than under historical cost.