IFRS and US GAAP authorised CMUCPP automatically maintains the constant purchasing power of constant real value non-monetary items (e.g. capital, all items in shareholders´ equity, provisions, salaries, wages, pensions, taxes, trade debtors/creditors, etc) only when updated in terms of the Daily CPI during low and high inflation, hyperinflation and deflation - ceteris paribus. European Accounting Association: "Capital maintenance is a competing objective of financial reporting."
Under CIPPA an economic item consists of three
value of the item expressed in terms of unstable money,
date of the event / exchange / transaction / contract and
nominal value of the daily index or daily monetized indexed unit of account or
daily relatively stable foreign currency parallel rate on that date.
All items are valued at the original date and
thereafter daily (more often during severe hyperinflation when the parallel
rate can change more than once a day) at all future dates in terms of IFRS,
excluding the stable measuring unit assumption and the IFRS definitions of
monetary items in 2011, implementing financial capital maintenance in units of constant
purchasing power in terms of a daily rate at all levels of inflation and
deflation always with reference to the daily rate at the original date.
nominal monetary value of, for example a constant item changes daily in terms
of the daily rate, but its real value is maintained constant over time at all
levels of inflation and deflation under CIPPA.
Copyright (c) 2005-2012 Nicolaas J Smith. All rights reserved. No reproduction without permission.