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Monday, 10 August 2009

Accountants are clueless (for dummies :-)

During the high-inflation period in the 1970´s accountants also did not really know what was going on.

They had and still have no clue about what constant real value non-monetary items or simply constant items are.

Constant items is a new concept for them although they always deal with them.

They are not taught to think for themselves as far as accounting matters are concerned.

For example: most of them do not know why they implement the stable measuring unit assumption and what its effect is on constant items. Many accountants do not even know that they implement the stable measuring unit assumption. They just do Historical Cost Accounting because the whole world does it and it has always been done like that.

Geoffrey Whittington is considered to be one of the world´s leading experts on inflation accounting. He did not even mention the stable measuring unit assumption once in his book "Inflation Accounting" published in 1983. That is astonishing.

They are taught that the only correct way of doing accounting is what appears in International Financial Reporting Standards.

If something is compliant with IFRS - then it is correct. They don´t really know why, and they do not really care to know.

If something is not compliant with IFRS - then it is not correct. They don´t really know why, and they do not really care to know.

Even if something is in IFRS and no-one is doing it, they do not care to know why no-one does it. That applies to the fact that the IASB authorized financial capital maintenance in units of constant purchasing power during low inflation 20 years ago, but no-one uses it.

They are not taught to think for themselves about matters of accounting.

They are taught to do what is generally accepted and to implement IFRS. That is all that matters.

Kindest regards,

Nicolaas Smith