doi.org/10.52340/eab.2024.16.03.12

To recognize elements in financial statements, it is necessary to establish monetary value. This is achieved only through the process of measurement that requires the selection of the appropriate basis and method.
The main difference between the basis and methods of measurement used under IPSAS and IFRS is the applicability of fair value.
Fair value can be difficult to use in the public sector, due to the following reasons:
Many assets are stored for current operating use, and it is impractical to get a selling price;
• If the asset cannot be sold, the costs of revaluating the asset may outweigh the benefits of the revaluation; and
• Many assets are either specialized or limited, which means there is no market for the, making it difficult to determine fair value.
Prior to the change, fair value was not offered as a basis for measurement on the conceptual basis of public sector financial reports, even though many IPSAS inclused fair value in measurement-related requirements or alternatives.
Neither fair value nor market value is such a measurement that is determined taking into account the specifics of the entities. Both are market data-based measurements. Therefore, existing models of measurement could not guarantee the valuation of the non-financial assets that the entities hold for their service potential, which was a challenge in the public sector.
In response to this problem, IPSASB made changes to the conceptual frameworks which was issued in an updated form in May 2023.
Updated conceptual frameworks, by eliminating unused measurement methods and increasing focus on those that are widely used in the financial statements of an entity, simplify the principles of valuations.
In order to bring the changes in the conceptual frameworks in line with the measurement standards, IPSASB issued a new standard in May 2023 -IPSAS 46 “Measurement~, which will come into force from 01 January 2025.
The standard considers current operational value, cost of fulfillment, and fair value as methods of current value measurement
With these changes, IPSAS recognizes the role of fair value in the valuation of public sector assets and allows its use.
But, the use of fair value is not considered successful in measuring assets that are tailored to specific operating requirements in the public sector. Most of these assets have specific characteristics and are almost impossible to acquire or sell in open, active and organized markets. In light of this fact, the IPSASB has developed a unique measurement base that does not exist in IFRS, called current operational value.
The current operational value is determined by the amount the entity will pay for the remaining potential of the asset during the expected period of use after the date of measurement. Its main purpose is to show the value of functioning of a non-financial asset as a public entity
The current operational value provides financial information on assets and associated depreciation and amortization at the measurement date, using updated data. Therefore, it reflects changes in the measurement of assets from the previous measurement date. Like fair value and cost of fulfillment the current operational value does not depend, even in part, on the transaction or event to which the creation of the asset is associated.
The operational Opportunity measurement provides information on the economic benefits that are obtained from the use of assets for operational purposes. It does not correspond to the measurement of the financial capacity of an asset, since such a measurement is not relevant to assets that will have the most valuable potential in providing services by continuing to use them.
The operational value is measured by the amount that the dentity would pay:
• To acquire the identical, or a similar, asset in an active market; or
• For the t costs that would be incurred to develop or produce the identical, or a similar, asset
Thus, market and cost approaches can be used to measure the current operational value For example, there may be an active market for an identical asset for certain types of assets. Using a market approach under these conditions is likely to be a direct measurement
When an asset becomes more specialized, the presence of an active market is likely to decrease. In these conditions, the cost approach is more relevant. For example, if prices are fixed only on new assets and the asset measured today has already been used, the current price of the same or similar asset should be adjusted taking into account its age and condition. However, in both cases, the main goal is always the same: to reflect the value of a given asset in its use, when providing services in current market conditions.
As for the revenue approach, its measurement techniques do not correspond to current operational value, since public sector assets often generate little or no cash flows, and future revenue streams will not be discounted.
In the financial situation reporting, the current operational value reflects the amount the entity would have paid at the date of the measurement for the remaining service potential of its existing asset. And, in the statement of financial results, it reflects the consumed part of the value of the asset when providing the service, as of the date of measurement
Thus, an updated approach of measurement of financial elements in the public sector will help improve the information system of public sector assets and their management, as it more accurately reflects the economic reality of the financial situation of the entity

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Keywords: measurement, service potential; fair value, operating assets, current operational value.
JEL Codes: H83, H89, J45