Wednesday, 14 March 2012

Definition of monetary items


Monetary items are all items in the money supply.

Updated on 17 Jan 2014

Elaboration on the definition of monetary items

Monetary items are thus units of currency held the change in the real value of which is indicated by internal inflation and deflation and other items with an underlying monetary nature, the latter being substitutes for said units of currency held.

Examples of units of currency held which are only affected by internal inflation and deflation are internal bank notes and coins.

Examples of items with an underlying monetary nature which are substitutes for said units of currency held include the capital amount of bank loans, bank savings, credit card loans, car loans, home loans, student loans, consumer loans, commercial and government bonds, Treasury Bills, all capital and money market investments, notes payable, notes receivable, etc. when these items are not in the form of internal units of currency held.

Inflation and deflation have no effect on the real value of non-monetary items.

Examples of constant real value non-monetary items treated as monetary items under the Historical Cost paradigm in IFRS which implements the stable measuring unit assumption in the valuation of these items:

Pensions, salaries, wages, borrowing costs, trade debtors, trade creditors, taxes payable, taxes receivable, all other non-monetary payables and receivables, interest (paid and received), bank charges, fees,

The stable measuring unit assumption is never applied under financial Capital Maintenance in Units of Constant Purchasing Power (CMUCPP) as authorized in the original Framework (1989), Par. 104 (a) [now the Conceptual Framework (2010), Par. 4.59 (a)] as follows:

‘Financial capital maintenance can be measured in either nominal monetary units or units of constant purchasing power.’

Nicolaas Smith

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