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."
Difference between Historical Costs under HCA and CIPPA
Difference between Historical Costs
under HCA and CIPPA
Historical Cost Accounting
stable measuring unit assumption is implemented under financial capital
maintenance in nominal monetary units (HCA). Historical Costs under HCA are
thus always nominal Historical Costs, i.e., always wrong in terms of today´s
real value, namely in terms of today´s Daily CPI.
is not even one set of HC financial statements technically correct in terms of
today´s real value. All HC financial statements are wrong in this sense: they
are all wrong in terms of real value since they are all based on nominal
Historical Costs during inflation and deflation. The higher the accumulated
rate of inflation or deflation since the original date of the Historical Cost
and the date it is accessed (read) in the financial statements, the greater the
degree of error. HC financial statements prepared during hyperinflation is generally
Constant Item Purchasing Power Accounting
stable measuring unit assumption is never implemented under financial capital
maintenance in units of constant purchasing power (CIPPA). Historical Costs
under CIPPA are thus never nominal Historical Costs: they are always Historical
Costs updated to the current, i.e., today´s, real value in terms of today´s
Daily CPI or other daily index when the financial statements are in a digital
format, i.e., automatically updated daily.
would result in daily updated real gross and net margins. It would result in
daily updated real profit before tax, real tax payable, real dividends payable
and real profit after tax, i.e. real net income; all continuously maintained
constant in real value by means of financial capital maintenance in units of
constant purchasing power and automatically updated to the current, i.e.,
today´s, Daily CPI or other daily index. This would result in the automatic
maintenance of the constant purchasing power of capital in all entities that at
least break even in real value – ceteris
paribus – at all levels of inflation and deflation.
would maintain (instead of erode) hundreds of billions of US Dollars in real
value in the world´s capital investment base each and every year at the current
level of world inflation.