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Tuesday, 3 January 2012

Differences betweetn CIPPA and CPPA

Differences betweetn CIPPA and CPPA

CIPPA                                                                          CPPA  

1.      When implemented


Implemented at all levels of inflation and deflation.                                             


Only implemented during hyper-  inflation as required by IAS 29


2.      Stable measuring unit assumption


The stable measuring unit assumption is never implemented.                            


The stable measuring unit assumption is implemented in the preparation of Historical Cost or Current Cost financial reports which are then restated in terms                                                                                      of the period-end monthly published CPI only during hyperinflation.


3.      Non–monetary items 


Non–monetary items are split in variable 
and constant real value non–monetary
items.


No split in non–monetary items.

4.      Capital concept 


Constant purchasing power financial    capital concept implemented.                         


Nominal financial capital concept imple-mented in HC or CC financial reports then restated in terms of the period–end monthly published CPI only during hyper-inflation.


5.      Capital maintenance concept


Financial capital maintenance in units   
of constant purchasing power concept       
implemented: i.e., shareholders´ equity     
is measured in units of constant purch–     
asing power in terms of a daily rate at     
all levels of inflation and deflation.          


Nominal financial capital maintenance concept implemented: shareholders´ equity is measured in nominal monetary units in HC or CC financial reports during the accounting period which are then
restated in terms of the period–end monthly published CPI only during hyperinflation.


6.       Inflation–accounting model or not?


A basic accounting model implemented 
at all levels of inflation and deflation in-       
cluding during hyperinflation.               


An inflation–accounting model imple-mented only during hyperinflation.  

7.       IFRS authorization


Originally authorized in IFRS in the Framework (1989), Par 104 (a).                 


Authorized in IFRS in IAS 29 in 1989.



8.      Measurement


Daily measurement of all items in terms of a daily rate as detailed below.                 


Non-monetary items in HC or CC financial reports are restated at the end of the accounting period in terms of the period-end monthly published CPI.     
                                                                

9.      Measurement of monetary items


Historic and current period monetary   
items are inflation–adjusted daily in terms of a daily rate. When not inflation
 –adjusted daily during the current
 period, the net monetary loss or gain 
 is calculated and accounted.                                              


Monetary items are measured in      
nominal monetary units. They are not
inflation–adjusted or restated. The net
monetary loss or gain is calculated and
accounted in terms of incorrectly defined monetary and non-monetary items.                                                                       

10.   Measurement of variable items


Variable items are measured in terms of
IFRS and updated daily in terms of  a daily rate when not measured daily in terms of IFRS.                                                         


Non–monetary items are not split in
variable and constant items. All non–monetary items in HC or CC financial reports are restated in terms of the period–end monthly published CPI.


11.  Measurement of constant items


Historic and current period constant  items are measured in  units of constant purchasing power  on a daily basis in terms of a daily rate.                                              



Non–monetary items are not split in
variable and constant items. All non–monetary items in HC or CC financial reports are restated in terms of the period–end monthly published CPI.     
           

12.  Net constant item loss or gain


Net constant item loss or gain calculated
and accounted. This is a new accounting
concept.                                                        
   

A net constant item loss or gain concept does not exist under HCA, CPPA and IFRS.

13.  Measurement of trade debtors and trade creditors


Constant real value non–monetary pay–
ables and receivables (e.g. trade debtors  
and trade creditors) are measured in
terms of a daily rate. The net constant    
item loss or gain is accounted where           
applicable.                                                


Trade debtors and trade creditors and other payables and receivables are treated as monetary items and measured in nominal monetary units in HC or CC financial reports. They are not restated. The net real value loss or gain during
hyperinflation is incorrectly accounted as a net monetary loss or gain in terms of IAS 29. It is a netconstant item loss or gain.   
  

14.  Consumer Price Index 


Daily Consumer Price Index or a monetized daily indexed unit of account used during low and high inflation and deflation. Daily US Dollar parallel or daily index rate used during hyperinflation.         


Monthly Consumer Price Index used
during hyperinflation as per IAS 29.

15.  Parallel rate


Daily hard currency parallel rate used 
during hyperinflation.                                       


Daily hard currency parallel rate not used during hyperinflation.                

16.  Indexation


Daily indexation can be used during       
hyperinflation, e.g. in terms of a Brazilian-                
style Unidade Real de Valor.


No daily indexation used during
hyperinflation.
              

17.   Monetized daily indexed unit of account


A monetized daily indexed unit of account
can be used at all levels of inflation and deflation.                                                                


A monetized daily indexed unit of account not used during hyperinflation.

Nicolaas Smith

Copyright (c) 2005-2012 Nicolaas J Smith. All rights reserved. No reproduction without permission.