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Monday, 10 August 2009

SA accountants are clueless about price-level accounting during low inflation

As a result of this lack of appreciating the destructive nature of their implementation of the very destructive stable measuring unit assumption, 1970-style Constant Purchasing Power inflation accounting was also not an accounting system implemented by accountants to correct or eliminate the destruction of the real value of constant items by the use of the stable measuring unit assumption, but, a failed attempt to simply make financial reports more understandable and more comparable with previous year statements during periods of high inflation by inflation-adjusting all non-monetary items equally in terms of the CPI.

Accountants simply do not appreciate that they unknowingly destroy real value on a massive scale in all constant real value non-monetary items never or not fully updated when they choose to implement the very destructive stable measuring unit assumption for an unlimited period of time during indefinite inflation.

They also do not appreciate that they make that choice.

Neither do they appreciate that they will stop that destruction by freely choosing to measure financial capital maintenance in units of constant purchasing power, as approved in the IASB Framework, Par. 104 (a) in 1989.

Kindest regards,

Nicolaas Smith