IFRS and US GAAP authorised CMUCPP 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) in terms of a Daily CPI in entities that at least break even in real value during low and high inflation, hyperinflation and deflation - ceteris paribus. European Accounting Assoc: "Capital maintenance is a competing objective of financial reporting."
Examples of constant real value non–monetary items
Examples of constant real value non–monetary
Definition Constant items are non–monetary items with constant real
values over time.
Examples are salaries, wages, pensions and other employee
benefits to be settled in cash; provisions that are to be paid in cash,
dividends to be paid in cash that are recognised as liabilities, prepaid
amounts for services and goods (e.g. rent prepaid), wages,rentals, all other income statement items as
well as balance sheet constant items, e.g. issued share capital, retained
earnings, capital reserves, share issue premiums, share issue discounts,
revaluation surplus, all other shareholder’s equity items, provisions, trade
debtors, trade creditors, provisions, taxes payable and receivable, deferred
tax assets and liabilities, dividends payable and receivable, royalties payable
and receivable, all other non–monetary payables and receivables, etc.
Constant items are fixed in terms of real value while their
nominal values change daily in terms of a Daily Consumer Price Index(DCPI)during low inflation, high inflation and deflation.
Copyright (c) 2005-2012 Nicolaas J Smith. All rights reserved. No reproduction without permission.