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Tuesday 17 April 2012

A fact will eventually prevail over an assumption of that fact

A fact will eventually prevail over an assumption of that fact

Under the stable measuring unit assumption it is assumed that changes in the purchasing power of money are not sufficiently important to require capital maintenance in units of constant purchasing power during inflation and deflation.

The 3000-year-old, generally accepted, globally implemented, traditional Historical Cost Accounting model is based on the stable measuring unit assumption.

The fact is that changes in the purchasing power of money are sufficiently important to require capital maintenance in units of constant purchasing during inflation and deflation as authorized in IFRS and implemented under Constant Item Purchasing Power Accounting.

Just as the double-entry accounting model drove out weaker accounting models in the past, so will capital maintenance in units of constant purchasing power (CIPPA) drive out HCA in the future. Financial capital maintenance in units of constant purchasing power (CIPPA) will eventually prevail over financial capital maintenance in nominal monetary units (HCA).

Nicolaas Smith

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

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