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."
IASB not to include Capital Maintenance in Units of Constant Purchasing Power difference with IAS 29 in IFRS
IASB not to include Capital Maintenance
in Units of Constant Purchasing Power difference with IAS 29 in IFRS
‘ “IAS 29
is not required during hyperinflation when an entity implements CMUCPP because
this model is not a HCA model and only HC or CC financial statements are
restated as required in IAS 29.” ‘
from the IASB, 2013
issue treated in the above statement is not to be added to IFRS as an IFRIC or
an addition to IAS 29 because “the issue is not widespread” as stated by the
IASB in a teleconference in December 2012 and again in a second teleconference
on 8 January 2013.
are all very thankful that hyperinflation is not widespread in the world
economy. That does not mean that we should be satisfied with the fact that the
failed IAS 29 has no positive effect during hyperinflation as fully proven during the 8
years that it was implemented in Zimbabwe´s hyperinflation with no positive effect - in
the way the IASB indicated that the Board is satisfied with the fact that IAS 29
had no positive effect in Zimbabwe, that nothing needs to be done about it and that it
would most probably be maintained in the future replacement of IAS 29: implementing
the failed IAS 29 model even at lower levels of inflation as proposed by the
Argentinean Accounting Federation.
is correct to depart from Historical Cost Accounting at 10% annual inflation
and at 26% cumulative high inflation over three years instead of only at
hyperinflation of 100% cumulative inflation over three years as required in IAS
29, but not maintaining the
failed IAS 29 model since “Inflation-adjusted
financial statements are an extension to, not a departure from historical cost
accounting” as correctly stated by PricewaterhouseCoopers: the failed IAS 29
requires the inflation-adjustment of Historical Cost and Current Cost financial
statements during hyperinflation.The implementation of the failed IAS 29 had no
positive effect during 8 years of implementation in the Zimbabwe economy.
the IASB indicated that the above issue would not be included in IFRS because it
is not “wide spread”, the future replacement of IAS 29, which deals with
financial reporting during hyperinflation – an economic environment which falls
in the same not “wide spread” category – is nevertheless being submitted to
research by the IASB.
IASB thus, luckily, does not have a consistent basis for deciding what to deal
with and what not to deal with in IFRS. The above two issues deal with the same