IPSAS 46
Active
Measurement
Defines measurement bases that help fairly reflect cost of services, operational capacity, and financial capacity, covering historical cost, current operational value, cost of fulfillment, and fair value, including measurement techniques and the fair value hierarchy. Effective 1 January 2025.
Active Standard
IPSAS 46 Measurement is the current, active standard issued by the IPSASB defining measurement bases that help fairly reflect cost of services, operational capacity, and financial capacity. It covers historical cost, current operational value, cost of fulfillment, and fair value, including measurement techniques and the fair value hierarchy. Effective for periods beginning on or after 1 January 2025.
IPSAS 46 is drawn primarily from IFRS 13 Fair Value Measurement, but is much broader – covering historical cost, current operational value, cost of fulfillment, and fair value, whereas IFRS 13 covers only fair value. IPSAS 46 operationalizes the Conceptual Framework's Chapter 7 models/bases/techniques structure into binding requirements, and delegates disclosure requirements to the individual IPSAS governing each asset or liability.
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Objective, Scope & the Four Measurement Bases (paras. 1–5)
Objective – operationalizing the Conceptual Framework
Defines measurement bases that help fairly reflect COST OF SERVICES, OPERATIONAL CAPACITY, and FINANCIAL CAPACITY – the same three lenses from the Conceptual Framework's Chapter 7. IPSAS 46 identifies the APPROACHES under each basis that individual IPSAS then apply to achieve financial reporting's objectives.
Applies whenever ANOTHER IPSAS requires/permits one of the four bases, OR a measurement based on one of them (e.g. fair value less costs of disposal) (para. 3).
Scope carve-outs, and the four bases (para. 4, 20)
Leasing transactions (IPSAS 43) Service concession arrangements (IPSAS 32) Similar-but-distinct measurements – net realizable value (IPSAS 12), value in use (IPSAS 21/26) – though IPSAS 46 STILL governs FAIR VALUE measurement within those Standards
Historical cost (Appendix A) Current operational value (Appendix B) Cost of fulfillment (Appendix C) Fair value (Appendix D)
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Definitions (para. 6)
The four bases, defined
Historical cost
Consideration given (plus transaction costs) to acquire/construct/develop an asset, or received (minus transaction costs) to assume a liability, at the time incurred.
Current operational value
The amount an entity would pay for the remaining service potential of an asset at the measurement date.
Cost of fulfillment
The costs an entity will incur fulfilling a liability, assuming it does so in the least costly manner.
Fair value
The price received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.
Fair value hierarchy & supporting vocabulary
Level 1 / 2 / 3 inputs
Quoted prices in active markets for identical items / other observable inputs / unobservable inputs – in DESCENDING order of reliability.
Market participants
Independent, knowledgeable, able, and willing buyers/sellers in the principal or most advantageous market.
Orderly transaction
One assuming market exposure before the measurement date for usual/customary marketing – NOT a forced liquidation or distress sale.
Deemed cost
An amount used as a surrogate for transaction price at the measurement date.
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Initial Measurement – Transaction Price & Deemed Cost (paras. 7–16)
Default: transaction price
Initial measurement = transaction price ± transaction costs – UNLESS it fails to faithfully represent relevant information, or another IPSAS requires/permits otherwise
In an ORDERLY market, the transaction price is PRESUMED to present relevant information (paras. 8–9).
When deemed cost steps in – six trigger scenarios (para. 12)
Transaction prices with a CONCESSIONARY element Assets transferred FREE OF CHARGE or DONATED Liabilities imposed by LEGISLATION or regulation Liabilities for compensation/penalty from wrongdoing or breach of contract Prices affected by RELATED-PARTY dynamics, financial distress, or duress Prices unavailable at the IPSAS 33 date of adoption
Where deemed cost applies, a CURRENT VALUE basis determines it (para. 10); any difference between deemed cost and actual consideration is revenue/expense, unless it's a contribution from owners or another IPSAS requires otherwise (para. 11). Transaction costs at initial measurement reflect only costs of the ACTUAL transaction – possible FUTURE disposal/settlement costs are excluded unless explicitly required (para. 14).
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Subsequent Measurement – Models & Bases (paras. 17–20)
The accounting policy choice, and its downstream effect
Choose HISTORICAL COST or CURRENT VALUE as the measurement MODEL – this choice then determines which specific BASIS applies
The model selection considers the item's characteristics, the measurement OBJECTIVE, and the monetary information being presented (para. 18). This is the SAME structure introduced in Conceptual Framework Chapter 7 (models → bases → techniques) – IPSAS 46 operationalizes it into binding requirements.
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Historical Cost Basis (Appendix A, paras. A1–A6)
An entry, entity-specific value – frozen at acquisition
Derived, at least in part, from the ACTUAL transaction price (or deemed cost). After initial measurement, the gross carrying amount is UNAFFECTED by changes in current market conditions – UNLESS those changes trigger impairment (para. A4). It's still updated for the SAME depreciation/interest/impairment mechanics as current value measurements (section 11) (para. A5).
Amortized cost – the financial-instrument application
The historical cost basis is applied to financial instruments via AMORTIZED COST – reflecting estimated future cash flows discounted at the rate determined at INITIAL measurement, updated over time for interest accrual, impairment, and payments (para. A6) – directly connecting to IPSAS 41's effective interest method.
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Current Operational Value Basis (Appendix B, paras. B1–B8)
Four determinations, and three defining features
The amount the entity WOULD PAY The REMAINING SERVICE POTENTIAL, given current condition The asset consistent with its UNIT OF ACCOUNT – existing use and location The appropriate MEASUREMENT TECHNIQUE(S)
Differs from fair value in THREE ways (para. 25): it's explicitly an ENTRY price including all costs necessarily paid; it reflects the asset's EXISTING use (not highest and best use – a building used as a hospital is valued AS a hospital); and it's ENTITY-SPECIFIC, reflecting the entity's own economic position.
Worked example – military aircraft with no active market (para. B6)
Many military assets (e.g. aircraft) have no active market and cannot be acquired as an identical/similar finished product
Current operational value is estimated by costing EACH PART (fuselage, engine, electronics, etc.) and the cost to ASSEMBLE them into the same/similar aircraft – adjusted for age, functionality, and condition.
When an active market DOES exist for an identical/similar asset, that price is used directly (para. B5). Entity-specific assumptions reflect the economic, legal, and other constraints affecting the asset's possible uses (para. B8).
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Cost of Fulfillment Basis (Appendix C)
An exit, entity-specific cost – the least costly manner
Cost of fulfillment = PV of cash/resources the entity expects to be OBLIGED to transfer, fulfilling the liability in the LEAST COSTLY manner it can access
Reflects the SAME factors as fair value, but from the ENTITY's perspective rather than a market participant's (para. 28). No exhaustive search of fulfillment methods is required – but the entity considers all REASONABLY AVAILABLE information; absent contrary evidence, the CURRENTLY SELECTED method is presumed least costly.
Worked example – restoring land beyond the minimum obligation
An entity has a liability to restore land to its original condition once a temporary road is no longer used – but intends to ENHANCE the land beyond that
The cost of fulfillment reflects ONLY the minimum restoration obligation. Enhancement costs are BEYOND the liability's scope and are NOT part of cost of fulfillment – if the entity genuinely intends to go beyond its commitment, IPSAS 19 governs that excess separately.
Where fulfillment uses the entity's OWN employees, no profit margin is included (it isn't a genuine resource use); where a CONTRACTOR is used as the least-costly method, the contractor's own margin IS implicitly included, since the total amount charged is a real claim on the entity's resources.
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Fair Value Basis (Appendix D, paras. D1–D10)
An exit, market-based value – four determinations
The particular asset/liability (per its UNIT OF ACCOUNT) For non-financial assets: the VALUATION PREMISE – consistent with HIGHEST AND BEST USE The PRINCIPAL (or most advantageous) market The appropriate MEASUREMENT TECHNIQUE(S) and fair value hierarchy level
Principal market, and market participant assumptions
Assumes an orderly transaction in the PRINCIPAL market – or, absent one, the MOST ADVANTAGEOUS market. No exhaustive market search is required; absent contrary evidence, the market the entity would NORMALLY use is presumed principal/most advantageous (paras. D3–D4). Even where no observable market exists, fair value STILL assumes a hypothetical transaction, from the perspective of a market participant holding the asset or owing the liability (para. D8). Assumptions used are those market participants would apply, acting in their own economic best interest – WITHOUT needing to identify specific participants (paras. D9–D10).
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Characteristics of the Asset/Liability & Unit of Account (paras. 32–35)
Characteristics affecting measurement
Condition, use, and LOCATION of the asset RESTRICTIONS, if any, on its sale or use
Considered wherever market participants (fair value) or the entity itself (entity-specific bases) would take them into account when pricing (para. 32).
Stand-alone vs. group, and the unit of account link
The measured item may be a STAND-ALONE asset/liability, OR a GROUP (a cash-generating unit, or an operation). Whether it's treated as stand-alone or grouped for recognition/disclosure depends on its UNIT OF ACCOUNT – determined by whichever IPSAS requires/permits applying this Standard's bases, except where IPSAS 46 itself specifies otherwise (paras. 34–35).
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Measurement Techniques – Market, Cost & Income Approaches (paras. 36, 44–45)
Three techniques, chosen for available data
ApproachMechanic
Market approachUses prices/information from market transactions involving identical or comparable items
Cost approachReflects the amount currently required to replace an asset's service capacity – "current replacement cost"; uses a MODERN EQUIVALENT ASSET providing equivalent service (para. 44)
Income approachConverts future amounts (cash flows, revenue/expenses) to a single CURRENT (discounted) amount, reflecting current expectations (para. 45)
Selection criteria
The entity uses techniques APPROPRIATE in the circumstances, for which SUFFICIENT DATA is available to estimate the measurement basis or determine deemed cost (para. 36) – directly mirroring the Conceptual Framework's own "measurement techniques" tier beneath models and bases.
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Depreciation, Impairment & Other Adjustments (paras. 46–48)
Methods, not measurement bases in their own right
Depreciation and impairment apply across BOTH the historical cost model AND the current value model – they REFLECT consumption or benefit loss, but are not themselves bases or techniques (para. 46).
How assets and liabilities update over time
ItemUpdated to reflect
ASSETConsumption (depreciation/amortization); payments that extinguish it; impairment; interest accrual for any financing component (para. 47)
LIABILITYFulfillment (payments, obligation satisfaction); becoming ONEROUS (carrying amount no longer sufficient); interest accrual (para. 48)
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Transaction Costs in Subsequent Measurement (paras. 49–53)
Incremental, and entry- vs. exit-based inclusion
Transaction costs = incremental costs that WOULDN'T have been incurred but for the transaction
Operating costs after acquisition are incremental but NOT transaction costs – they're not a direct result of the transaction itself (para. 50). Costs to NEGOTIATE beforehand, or BORROWING costs afterward, are also excluded (para. 51).
ENTRY-based measurement bases (historical cost, current operational value) → include costs of ENTERING the transaction EXIT-based, ENTITY-SPECIFIC bases (cost of fulfillment) → include costs that WOULD be incurred exiting – a possible future transaction Fair value, being NON-entity-specific, generally does NOT build in the entity's own future transaction costs the same way (para. 53)
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The Fair Value Hierarchy – Levels 1, 2 & 3 (paras. D58–D65)
Three levels – priority by input reliability
LevelInput type
1Quoted prices (unadjusted) in ACTIVE markets for IDENTICAL items, accessible at the measurement date – the HIGHEST priority, used WITHOUT adjustment whenever available
2OTHER observable inputs – directly or indirectly
3UNOBSERVABLE inputs – the LOWEST priority
The "lowest significant input" rule
A measurement using inputs from MULTIPLE levels is categorized ENTIRELY at the LOWEST level that's SIGNIFICANT to the overall measurement (para. D59). If a Level 2 input requires an unobservable adjustment that SIGNIFICANTLY changes the measurement, the WHOLE thing drops to Level 3 (para. D61) – e.g. adjusting a quoted price for a sale restriction using an unobservable input. Costs-to-sell-type adjustments are NOT considered when determining the hierarchy level itself (para. D59).
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Disclosure Requirements (paras. 54–55)
Delegated entirely to the individual IPSAS
Disclose information helping users assess the MEASUREMENT BASIS, TECHNIQUES, and INPUTS used – by applying the measurement disclosure requirements in the SPECIFIC IPSAS governing that asset/liability
Unlike IFRS 13 (which centralizes ALL fair value disclosures in one place, section 16), IPSAS 46 doesn't prescribe its OWN standalone disclosure package – instead, each individual Standard (IPSAS 12, 16, 27, 31, 45, and others throughout this library) carries the specific fair value hierarchy disclosure requirements you've seen repeated consistently across their own posters.
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Effective Date & Transition (paras. 56–58)
A single clean effective date, applied prospectively
Periods beginning on/after 1 January 2025 – applied PROSPECTIVELY from the start of the annual period in which it's first applied (para. 58). Entities adopting accrual IPSAS AFTER this date apply IPSAS 46 from their own IPSAS 33 date of adoption (para. 57).
Unlike most Standards in this library, IPSAS 46 has NO subsequent amendment entries yet in the Handbook – it's one of the newest Standards, itself the SOURCE of measurement-methodology amendments flowing INTO other Standards (IPSAS 12, 16, 27, 31, 34, 39, 43, 44, 45, and more all received consequential amendments FROM IPSAS 46's issuance, as seen throughout this library's own amendment timelines).
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Relationship to IAS/IFRS & GFS – Comparison with IFRS 13
Comparison – IPSAS 46 vs IFRS 13
The FAIR VALUE requirements are drawn primarily from IFRS 13 (issued 2011, amendments to Feb 2023), Fair Value Measurement.
IPSAS 46 is much BROADER – covering historical cost, current operational value, cost of fulfillment, AND fair value; IFRS 13 covers ONLY fair value IPSAS 46 delegates disclosure to each RELEVANT IPSAS (section 14); IFRS 13 centralizes ALL fair value disclosures in one place
Comparison – IPSAS 46 vs GFS
Actual similarity/difference DEPENDS on the specific transaction and period-end carrying amounts Initial recognition: IPSAS 46 uses transaction price/deemed cost; GFS generally uses MARKET PRICES for everything – the two CAN converge IPSAS 46 requires transaction cost capitalization for ALL assets; GFS only for the cost of OWNERSHIP TRANSFER on non-financial assets Subsequent measurement: IPSAS 46 allows FOUR bases; GFS generally uses market prices – convergence is possible if the market approach happens to be selected as the IPSAS 46 technique
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Statement / Process Mapping
Measurement decision map
- Initial recognition: is there a genuine transaction price from an ORDERLY market? → use it ± transaction costs. If not (six deemed-cost triggers) → use DEEMED COST via a current value basis (section 3)
- Subsequent measurement: does the relevant IPSAS mandate a basis, or offer a choice? → select the MODEL (historical cost or current value), then the specific BASIS (section 4)
- Which basis fits the objective? Asset held for OPERATIONAL capacity → current operational value (section 6). Held for FINANCIAL capacity or a market-based need → fair value (section 8). Liability → cost of fulfillment (section 7). Simple pass-through → historical cost/amortized cost (section 5)
- Select an appropriate MEASUREMENT TECHNIQUE – market, cost, or income approach, based on available data (section 10)
- If fair value → determine the HIERARCHY LEVEL based on the lowest significant input used (section 13)
- Apply depreciation/impairment/interest-accrual updating mechanics consistently, regardless of the underlying model (section 11)
- Disclose per the SPECIFIC IPSAS governing the asset/liability in question – not a standalone IPSAS 46 package (section 14)
Concept-to-statement mapping table
IPSAS 46 conceptStatement(s)Notes
Historical cost carrying amountSOFPFrozen at acquisition except for impairment
Current operational value / fair value carrying amountSOFPUpdated at each measurement date
Cost of fulfillment liabilitySOFPReflects least-costly settlement method
Deemed cost adjustment vs. actual considerationSOFPerfRevenue or expense, unless a contribution from owners
Fair value hierarchy classificationNotesPer the governing individual IPSAS, not IPSAS 46 itself
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Related Standards – Cross-Reference Map
How IPSAS 46 connects across the IPSAS body of literature
StandardNature of the connection
Conceptual FrameworkChapter 7's models/bases/techniques structure is directly operationalized here into binding requirements (section 1, section 4, section 10)
IPSAS 12 / 16 / 27Apply the fair value/current value bases for inventories, investment property, and biological assets
IPSAS 19Governs excess-of-minimum-obligation restoration/enhancement costs beyond cost of fulfillment (section 7)
IPSAS 20Related party definition informs the market participant independence test (section 2)
IPSAS 21 / 26Value in use is explicitly EXCLUDED from IPSAS 46's bases, though fair value WITHIN those Standards still follows this Standard (section 1)
IPSAS 31 / 45Apply the current operational value / fair value dual basis for intangibles and PP&E
IPSAS 32 / 43Explicitly excluded from IPSAS 46's measurement requirements (section 1)
IPSAS 33Deemed cost concept directly underpins first-time-adoption transitional relief
IPSAS 41Amortized cost application of the historical cost basis (section 5)
IPSAS 44Fair value less costs to sell measurement for held-for-sale assets
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Quick-Reference Glossary
Active market
A market where transactions occur with sufficient frequency and volume to provide ongoing pricing information.
Highest and best use
The use of a non-financial asset by market participants that would maximize its value.
Principal market
The market with the greatest volume and level of activity for the asset or liability.
Most advantageous market
The market maximizing sale proceeds or minimizing transfer payment, after transaction and transport costs.
Non-performance risk
The risk that an entity will not fulfill an obligation, including its own credit risk.
Unit of account
The level at which an asset or liability is aggregated or disaggregated for recognition purposes.
Financial statement key
SOFP Statement of financial position
SOFPerf Statement of financial performance
Notes Notes to the financial statements