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Tuesday, 27 December 2011

Strengths of CIPPA compared to HCA during low inflation

Strengths of CIPPA compared to HCA during low inflation

1.       It automatically maintains the constant purchasing power of capital constant for an indefinite period of time (zero erosion of real value in constant items) in all entities that at least break even in real value during low inflation and deflation – ceteris paribus – whether they own any revaluable fixed assets or not.
2.       It was authorized in IFRS in 1989.
3.       It can right now be implemented by any individual company implementing IFRS.
4.       It can be used to eliminate the effect of inflation from the entire money supply - zero inflation - (excluding from actual bank notes and coins which generally make up about 7% of the money supply) only in the case of complete coordination with all money and other monetary items inflation-adjusted daily in terms of a Daily Consumer Price Index. Chile currently inflation-indexes 20 to 25% of its broad M3 money supply on a daily basis in terms of the Unidad de Fomento which is a monetized daily indexed unit of account.

5.       It would stop the unknowing, unintended and unnecessary erosion of hundreds of billions of USD per annum in the real value of constant items not maintained constant in the world´s constant item economy as a result of the implementation of the stable measuring unit assumption under HCA.
6.       It would instead maintain hundreds of billions of USD per annum in the world´s constant item economy at current levels – ceteris paribus.

Strengths of HCA

1.       It is the 3000-year-old generally accepted, globally implemented, traditional accounting model. Everybody uses HCA during low inflation and deflation.

2.       All accounting software packages are for implementing HCA.

3.       All accounting education at all levels is for teaching HCA.
Nicolaas Smith

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