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Sunday, 28 June 2009

Rejecting the stable measuring unit assumption is compliant with IFRS

Today´s Fin24 has an article starting: " South Africa's inflation-targeting framework is likely to be fine-tuned by the new government, said chief economist from Brait, Colen Garrow, on Friday."

"Target may be fine tuned" Fin24 28 June 2009

Mboweni averaged 5.93% annual inflation so far.

Upping the upper band to 7% will result in SA accountants unknowingly destroying a further cumulative 10% in constant items they refuse to maintain over the next 10 years.

They will thus unknowingly destroy 56% instead of 46% of the real value of all Retained Earnings never maintained in SA companies and banks today over the next 10 years.

That may amount to unknowingly destroying R202 billion instead of R200 billion p.a

When SA accountants freely choose to measure financial capital maintenance in units of constant purchasing power as approved by the IASB 20 years ago in the Framework, Par. 104 (a) which is compliant with IFRS, they will maintain instead of unknowingly destroy - as they are now doing - about R200 billion p.a. in the SA real economy for an unlimited period of time - ceteris paribus.

ABSA´s accountants are unknowingly destroying R3.3 bil. like that now.

Rejecting the stable measuring unit assumption is compliant with IFRS.

It will result in our accountants boosting the SA real economy by at least R200 billion (a conservative estimate) p.a. for an unlimited period of time - ceteris paribus.

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