Pages

Thursday, 3 September 2009

Question No1 for a chicken without a head

SA accountants, please answer the following question:

1. Is there inflation in SA or not?

Has there ever been any inflation in SA? Is the Rand perfectly stable or not? Is there zero inflation in SA or not?

The above are really all the same question.

SA accountants, on the one hand, you value variable items in terms of IFRS and SA GAAP under which the prices of variable items, eg. property, plant, equipment, shares, stock, etc., always automatically also include adjustments for inflation in the real value of the Rand. You clearly accept that there is inflation in the SA economy.

On the other hand, SA accountants, you act in practice as if there is no inflation in SA; you act in practice as if there has never ever been any inflation in the whole of the SA economic history. SA accountants, you act in practice as if the Rand is perfectly stable and that inflation is always at zero percent when you actually value constant items like companies Retained Profits at Historical Cost implementing your very destructive stable measuring unit assumption in SA´s low inflation environment as part or your real value destroying Historical Cost Accounting model you implement in all SA companies.

SA accountants do you have a clue of what is going on or are you jumping around the drive-way like a chicken without a head?

So, SA accountants: Is there inflation in SA or not?

If your answer is No, then fine: you are just a chicken without a head.

If your answer is Yes, there is inflation in SA, then I would like to know why you do not measure ALL constant items in SA – which is why you all earn those fantastic salaries and why you all have that elevated respect in the SA economy – in units of constant purchasing power as the IASB has authorized you to do 20 years ago when the Framework, Par 104 (a) was approved. It states:

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

SA accountants by valuing already existing constant items never or not fully updated at Historical Cost you unknowingly and unintentionally destroy about R200 billion PER ANNUM in their real value in the SA real economy.

When you freely change to measuring financial capital maintenance in units of constant purchasing power you will maintain existing real value to the amount of about R200 billion PER ANNUM for an unlimited period of time in the future. You will knowingly boost the SA real economy by at least R200 billion PER ANNUM for an unlimited period of time - ceteris paribus.

So, SA accountants: Is there inflation in SA or not?

Kindest regards,

Nicolaas Smith

No comments:

Post a Comment