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Monday, 5 April 2010

What to do if Malema´s "kill the Boer" leads to very high inflation in SA

If after the weekend killing of Eugene Terreblanche it so happens in the months and years to come that Julius Malema´s song "Kill the Boer" leads over time to the Rand weakening leading to much higher prices for imported goods resulting in an import inflation spiral in SA as well as Numsa and other trade unions demanding and getting 20% and higher wage increases SA may start to experience much higher rates of inflation.

If SA accountants just keep doing normal Historical Cost Accounting they will accelerate the downward course of the SA economy by destroying the SA real economy with traditional accounting like Zimbabwean accountants did over the last 30 years in that country.

Or, SA accountants can follow the Brazilian example and index all non-monetary prices by applying a daily index normally the US Dollar parallel rate daily. Brazil did that from 1964 to 1994. They had hyperinflation in their monetary economy but they stabilized their real economy with daily indexation. Indexation is in principle the same as implementing continuous financial capital maintenance in units of constant purchasing power as authorized in IFRS in the Framework, Par 104 (a) in 1989.


Kindest regards

Nicolaas Smith
realvalueaccounting@yahoo.com

Copyright © 2010 Nicolaas J Smith