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."
which includes financial reporting affects the economy via the accounting
policies and especially the measurement bases adopted by entities.Accounting records economic activity.
Economic activity is affected by the choice of accounting policies and
measurement bases. Accounting is recording of economic activity. Accounting
policies influence the choice of measurement bases which affects the economy.
most powerful measurement base affecting the economy is the choice of
implementing the stable measuring unit assumption, i.e., choosing Historical Cost
implementation of the stable measuring unit assumption is not the recording of
economic activity. Implementing the stable measuring unit assumptionis a business practice / policy which is
after the event recorded via accounting and financial reporting when the
period-end financial statements are prepared.
implementing the stable measuring unit assumption is not accounting. It is the
implementation of a business practice. The Conceptual Framework states that the
choice of the measurement bases and the capital maintenance concept chosen,
determines the accounting model.
the cost of inflation and the cost of hyperinflation because it is chosen by
the board of directors as the accounting model to be used by the entity. HCA
requires the implementation of the stable measuring unit assumption in the
measurement of certain items.
determines the business practice. HCA decides when economic items will be
required to be measured implementing the stable measuring unit assumption.
causes the cost of inflation and the cost of hyperinflation, not actual
inflation and actual hyperinflation which are economic processes, not
Opinions on this blog expressed by me are my personal opinions.
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