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Wednesday, 16 June 2010

Two economic enemies

There are two economic enemies destroying real value systematically in the SA economy. The first enemy - inflation - is an economic process. The second enemy is a Generally Accepted Accounting Practice.
The second economic enemy is SA accountants´ free choice of traditional Historical Cost Accounting which includes their very destructive stable measuring unit assumption. This second process of systemic real value destruction manifests itself in accountants´ stable measuring unit assumption only in the constant item part of the SA non-monetary or real economy when they freely choose to measure financial capital maintenance in nominal monetary units (one of the three popular accounting fallacies on which current IFRS are based) when they implement the traditional HCA model in SA companies during low inflation as approved in the IASB´s Framework, Par 104 (a) which is compliant with IFRS.
Copyright © 2010 Nicolaas J Smith