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."
constant item is a non-monetary item with a constant real value over time that is not generally
determined in a market on a daily basis within an entity.
real value non-monetary items are fixed in terms of real value while their
nominal values change daily in terms of a Daily CPI or other daily index under
financial capital maintenance in units of constant purchasing power (CIPPA).
of constant items is the generally accepted accounting practice of determining
the monetary amounts at which constant items are to be recognised, valued,
carried and accounted on a daily basis in the economy under all levels of
inflation and deflation. This involves the selection of the particular basis of
measurement. Constant items can only be measured in units of constant
purchasing power during inflation and deflation because the stable measuring
unit assumption is not applied in their measurement. Constant
items are always and everywhere valued in terms of IFRS in units of constant
purchasing power by applying the Daily CPI or a monetized daily indexed unit of
account at the current (today’s) rate under financial capital maintenance in
units of constant purchasing power (CIPPA) during low and high inflation and
deflation. Constant items would always and everywhere be valued on a daily
basis in terms of a relatively stable foreign currency parallel rate or a
Brazilian-style Unidade Real de Valor
index rate during hyperinflation.
capital maintenance in nominal monetary units (HCA) and its IFRS–authorized
alternative – financial capital maintenance in units of constant purchasing
power (CIPPA) – would be one and the same accounting model at permanently
sustainable zero inflation. This is proof that financial capital maintenance in
units of constant purchasing power (CIPPA) is the logical next step in our
fundamental model of accounting.
IASB defined monetary items in IAS 29 incorrectly as money on hand and items to
be paid in money or to be received in money. Most variable real value non–monetary
items as well as constant real value non–monetary items are generally received
or paid in money as the generally accepted monetary medium of exchange. The
fact that the IASB defines non–monetary items as all items in the income
statement and all other assets and liabilities in the balance sheet that are
not monetary items, after having defined monetary items incorrectly, leads to
the wrong classification of some constant real value non–monetary items,
notably trade debtors and trade creditors, as monetary items by, for example,
PricewaterhouseCoopers in their publication Understanding IAS 29. This results
in the net monetary gain or loss generally being calculated incorrectly by
companies implementing IAS 29 in hyperinflationary economies.
definition of non–monetary items as being all items that are not monetary items
is a generic definition. It is thus premised by the IASB that there are only
two fundamentally distinct items in the economy: monetary and non–monetary
items and that the economy is divided into two parts: the monetary and
non–monetary economy. IAS 29 and other IFRS are based on this premise of only
two fundamentally different items in the economy. This is a false premise.
is not true that there are only two basic economic items as defined in IFRS.
There are three fundamentally different basic economic items in the economy: