The IASB does not recognize constant real value non-monetary items by name.

South African accountants are taught that there are only two distinct economic items in the economy, namely, monetary items and non-monetary items.

Monetary items are defined by the International Accounting Standards Board in IAS 29, Par. 12 as follows:

Monetary items are money held and items to be received or paid in money.

The second part of this definition is not correct. When you buy your mobile phone on credit, the trade debtor amount in the supplier´s accounts is not a monetary item just because it has to be paid in money. The trade debtor amount relates to a variable real value non-monetary item, namely your mobile phone. When inflation destroys the real value of the money you use to pay the phone off at a rate of 15% per annum you have to pay 15% more money over a year to pay off the real value non-monetary item, the phone you bought. It is impossible for inflation to destroy the real non-monetary value of your phone as long as the value of your phone is determined in a free market. Inflation is always and everywhere a monetary phenomenon - as per Milton Friedman. Money is only the monetary medium of exchange used for payment. The non-monetary debt is for the real value of a real value non-monetary item - not for a monetary item. You did not borrow money. You bought a non-monetary item.

IAS 29 clearly defines monetary and non-monetary items as per the IASB.


Here follows the definition of Monetary items:

Monetary items are money held and items with an underlying monetary nature.


Non-monetary items are all items that are not monetary items. This IASB definition is correct for non-monetary items as a generic term. It is however taken that there are thus only two distinct items in the economy. The standard to be applied in hyperinflationary economies, International Accounting Standard IAS 29 Financial Reporing in Hyperinflationary Economies was developed on this basis.

It is not true that there are only two basic economic items as defined by the IASB. There are three fundamentally different basic economic items in the economy:

1. Variable real value non-monetary items
2. Monetary items
3. Constant real value non-monetary items

Constant real value non-monetary items are currently only recognized by definition and by name under

(1) Real Value Accounting (first identified in this book), in the

(2) Constant Item Purchasing Power Accounting article on Wikipedia,

(3) on this blog and

(4) on this blog´s South African version.

The IASB does not recognize constant real value non-monetary items by name or by definition. The fact that certain non-monetary items have constant real non-monetary values is implied by the IASB approval of the Constant Item Purchasing Power accounting model in the Framework for the Preparation and Presentation of Financial Statements Par. 104 (a):

"Financial capital maintenance can be measured in either nominal monetary units or units of constant purchasing power."

The IASB clearly defines issued share capital, retained income, all other items in shareholders´ equity, etc as non-monetary items. Since they can be measured in units of constant purchasing power they are implied to be constant real value non-monetary items.

Logic would thus imply that non-monetary items that can not be measured in units of constant purchasing power are not constant but variable real value non-monetary items, e.g. property, plant, equipment, shares, inventory, etc.

Constant real value non-monetary items are also implied by the fact that the IASB states in the Framework that accountants can choose to implement a financial capital concept of invested purchasing power where under they choose to measure financial capital maintenance in units of constant purchasing power (the real value maintaining Constant Item Purchasing Power Accounting model) instead of in traditional Historical Cost nominal monetary units (the real value destroying Historical Cost Accounting Model).

Kindest regards,

Nicolaas Smith