IFRS and US GAAP authorised CMUCPP automatically 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) only when updated in terms of the Daily CPI during low and high inflation, hyperinflation and deflation - ceteris paribus. European Accounting Association: "Capital maintenance is a competing objective of financial reporting."
How to stop hyperinflation in Iran overnight at no cost
How to stop hyperinflation in Iran overnight
at no cost
capital maintenance in units of constant purchasing power as authorized in IFRS
in terms of the US Dollar parallel rate as the Daily Index in Iran. This would
stop the cost of the stable measuring unit assumption – not the cost of hyperinflation
– in Iran. This would maintain the constant purchasing power (real value) of
capital constant for an indefinite period of time in all Iranian companies that
at least break even in real value
– all else being equal – at all levels of inflation or hyperinflation. This
would maintain the capital investment base in Iran constant in real value for
an indefinite period of time – as qualified above.
Iranian Accounting Standards Authority has to authorize an Iranian Accounting
Standard requiring (not optional) this from all companies in Iran.
would be required (not optional) from all countries in the world implementing
IFRS with annual inflation equal to or greater than 10 percent per annum or
cumulative inflation equal to or greater than 26 percent over three years – in
6 to 8 years´ time.
would end the 3000-year-old, globally implemented, generally accepted,
traditional Historical Cost Accounting model in these countries. It would be
the start of the end of the Historical Cost paradigm - the only accounting
paradigm the world has ever known.
would result in all salaries, wages, rents, royalties, fees, taxes, capital, retained
profits, all other items in equity, etc. being maintained constant in real
value in these companies in Iran on a permanent basis – as qualified above.
the entire rial money supply on a daily basis in terms of the US Dollar
parallel rate. This would end the cost of hyperinflation – not actual
hyperinflation – in Iran. It would be as if there is no hyperinflation in Iran
in all monetary items except in rial bank notes and coins.
Central Bank of Iran has to pass regulations requiring this in Iran.
would transform all monetary items (excluding rial bank notes and coins – they
have their nominal values permanently printed on them) into constant real value
monetary items in Iran.
measures require complete co-ordination (everyone doing it).
Step 1 and Step 2 are functioning correctly in Iran:
TheCentral Bank of Iran has to create a
new currency and float it in the foreign exchange market or simply float the
existing rial. This would end the US Dollar parallel rate in Iran. The local
economy would be stable by then.
deliberate creation of excessive monetary items in Iran, this would result in
stopping actual hyperinflation in rial bank notes and coins over a very short
period like it was done in Brazil in 1994 with the Real Plan. The cost of hyperinflation, on the other hand, would
automatically be eliminated permanently by daily inflation-indexing of the
money supply in terms of the US Dollar free-market rate.
above Daily Index Plan includes capital maintenance in units of constant
purchasing power in terms of a Daily Index as authorized in IFRS which the Brazilian
Real Plan did not have in 1994.
above steps would end the cost of hyperinflation and the cost of the stable
measuring unit assumption in Iran. The Iranian economy would stabilize in the
very short term: the Iranian monetary and constant item economies would operate
in constant real values at whatever rate of inflation or hyperinflation.
above Daily Index Plan can be implemented by any country to stop the cost of
and gain from any level of inflaton or deflation and the cost of the stable
measuring unit assumption at no cost.
inflationary, high inflationary and deflationary countries would not need to
introduce new currencies and would use their Daily Consumer Price Index (not
the US Dollar rate) as the Daily Index.
no cost Daily Index Plan eliminates Dollarization and a currency board as
solutions to hyperinflation.
is required is the first country implementing complete inflation-indexing of
the entire money supply. Chile inflation-indexes 25 percent of its broad M3 for
some years already. The accounting part of the Daily Index Plan would be
required (not optional) in IFRS in the near future.
Copyright (c) 2005-2012 Nicolaas J Smith. All rights reserved. No reproduction without permission.