Learning Objectives
• Defifine measurement in its scientifific context;
• Describe the various measurement scales
and relate the operation of scales to
measurement questions in accounting;
• Describe the ‘types’ of measurement and
evaluate their relationship to accounting;
• Relate issues of ‘accuracy’ and ‘reliability’ to
measurement issues in accounting; and
• Evaluate the importance of the qualitative
aspects of measurement
At the conclusion of this topic, you should be able
to:
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What is measurement?
“Assignment of numerals to objects or
events according to rules”
(Stevens)
• Involves linking the formal number
system to some property of objects or
events by means of semantic rules
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Scales
Scale – a rule to assign numbers
• nominal scale
numbers used only as labels
classification only
• ordinal scale
rank ordering of objects
intervals between not necessarily equal
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Scales
• interval scale
rank ordering of objects with a
known equal distance between them
• ratio scale
rank ordering of objects
intervals known and equal
a unique origin exists
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Permissible operations of scales
• ordinal scale
no arithmetic operations
• interval scale
addition and subtraction
• ratio scale
all arithmetic operations
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Types of measurement
• fundamental measurements
numbers assigned by reference
to natural laws
free of subjectivity
• ‘scientific’
• derived measurement
depends on the measurement of
2 or more other quantities
• eg: volume
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Types of measurement
fiat measurements
based on arbitrary definitions
numerous ways in which scales
can be constructed
may lead to poor confidence
eg. measurement of income
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Reliability and accuracy
Sources of error
• measurement operations stated
imprecisely
• measurer
• instrument
• environment
• attribute unclear
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Reliable measurement
• proven consistency
• repeatable or reproducible
• accuracy & certainty of
measurement (?)
• Representative faithfulness (?)
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Accurate measurement
• how close the measurement is to the
‘true value’ of the attribute measure
‘true value’ may not be known, however
• consistency of results, precision and
reliability may not lead to accuracy
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Qualitative Measurement
Information in annual report not all
numbers – qualitative information
How is this used in decision making?
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Learning objectives – recap
• Defifine measurement in its scientifific
context;
• Describe the various measurement scales
and relate the operation of scales to
measurement questions in accounting;
• Describe the ‘types’ of measurement and
evaluate their relationship to accounting;
• Relate issues of ‘accuracy’ and ‘reliability’
to measurement issues in accounting; and
• Evaluate the importance of the qualitative
aspects of measurement
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