Question

Question: Companies that use IFRS:

(a) must report all their assets on the statement of financial position (balance sheet) at fair value.

(b) may report property, plant, and equipment and natural resources at fair value.

(c) may refer to a concept statement on estimating fair values when market data are not available.

(d) may only use historical cost as the measurement basis in financial reporting.

Short answer

Answer

The correct option is(b) may report property, plant and equipment, and natural resources at fair value.

Step-by-step solution

Definition of Conceptual Framework

Conceptual frameworks can be defined as the fundamentals and the principles that must be followed to achieve the targeted objective of the financial reporting.

Explanation for correct options

The business entity reporting financial information under IFRS is allowed to report the PPR and natural resources at their fair market value under IFRS 13. IFRS 13 provides all the measurement and disclosure requirements of the PPE and natural resources at fair market value.

Explanation for incorrect options

1. Option (a) is incorrect because all of the assets are not reported on their fair value. Some of the assets, such as receivables and inventory, are reported at their net realizable value.
2. Option (c) is incorrect because the fair value cannot be estimated when the market data is unavailable.
3. Option (d) is incorrect because the business entity using IFRS can use fair value as a measurement basis in financial reporting.