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."
IAS 29 is not an alternative accounting model to HCA
IAS 29 is not an alternative
accounting model to HCA
capital maintenance concept is implemented under IAS 29?
Financial capital maintenance in nominal monetary units, i.e., Historical Cost
Accounting - during hyperinflation!!
my opinion HCA should be specifically banned by law during hyperinflation.
certain multinational state in its 2011 annual report that it implements HCA
for management control purposes -
during hyperinflation!! The last thing you want to implement during
hyperinflation is HCA. This multination thinks it is very useful to implement
HCA during hyperinflation – for management
lack of understanding of the real value eroding effect of the stable measuring
unit assumption and the real value maintaining effect of financial capital
maintenance in units of constant purchasing power is astonishing.
PricewaterhouseCoopers state in
their publication: Understanding IAS 29
(2006), Page 5:
IASB and PricewaterhouseCoopers thus promote and support HCA during hyperinflation.
Unbelievable, but true.
capital maintenance in nominal monetary units is a popular accounting fallacy
not yet extinct: it is impossible to maintain the real value of capital
constant with financial capital maintenance in nominal monetary units per se during inflation and deflation.
‘It is essential to the credibility of financial
reporting to recognize that the recovery of the real cost of investment is not
earnings — that there can be no earnings unless and until the purchasing power of capital is
purchasing power (real value) of capital can only automatically be maintained
constant for an indefinite period of time in all entities that at least break
even in real value – all else being equal – at all levels of inflation and
deflation, including during
hyperinflation, with financial capital maintenance in units of constant
purchasing power as authorized in IFRS in the Conceptual Framework (2010), Par.
4.59 (a) which states:
‘Financial capital maintenance can be measured in
either nominal monetary units or units
of constant purchasing power.’
is not required when an entity implements financial capital maintenance in
units of constant purchasing power during hyperinflation. IAS 29, Par. 8
‘The financial statements of an
entity whose functional currency is the currency of a hyperinflationary
economy, whether they are based on a historical
cost approach or current cost approach, shall be stated in terms of the
measuring unit current at the end of the reporting period.’