The base or basis that is used, in accounting, for measurement of value. The value of an element (e.g., an asset/ a liability) of financial statements/ accounts is calculated based on a specific measure such as historical cost, fair value, current cost, etc. For example, current cost is an alternative base of measurement used to determine the value of assets and liabilities in the balance sheet. It is defined as the cost which would be incurred to replace an asset or settle a liability in the current period.

Other measurement bases include:

• Current market value or “quoted market price” (for assets with a fixed selling price with no substantial cost of marketing, such as shares).
• Discounted cash flow (a measurement base for assets capitalized under long-term leases).
• Replacement cost is used as a measurement base for inventories and similar assets when the market price of another asset with equal economic benefits at the present time has fallen below historical cost of an existing (currently recognized) asset.