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."
1.The Daily CPI is used in the form of a
4, 3, 2 or 1 month lagged daily interpolated daily index based on the monthly
CPI based on similar formulae used to price government capital
inflation-indexed bonds on a daily basis in this USD 3.5 trillion global market.
This is done in most countries in the world. Most countries in the
world thus already publish a Daily CPI. The US uses the Daily
2.The Daily CPI is being suggested to the IASB in IFRS
´X´ CAPITAL MAINTENANCE IN UNITS OF CONSTANT PURCHASING POWER to be used to
correctly implement Capital Maintenance in Units of Constant Purchasing Power
as already authorized in IFRS in terms of a Daily CPI in the future replacement
of IAS 29 Financial Reporting in
Hyperinflationary Economies. This application is the use of the Daily CPI with
capital maintenance in units of constant purchasing power to replace the stable
measuring unit assumption, i.e., to replace (depart from) Historical Cost
3.Daily indices were used in the form
of government supplied daily indices as “correcção monetaria” or monetary
correction in mainly Latin American countries during generally very high and
hyperinflationary periods from the 1960´s to 2010. Correcção monetary or monetary correction was stopped in Chile in
2010 in order to conform with IFRS which are almost 100 per cent Historical
Cost Accounting based. The Brazilian Unidade Real de Valor
(URV) was one of these very successful Daily Indices used in Latin America.
Others are the currently used Unidad
de Fomento in Chile and the currently used Real Value Unit in
Colombia. The latter is used to index all mortgages in Colombia on a daily
basis. Latin American countries did not see daily indexing as simply an
accounting model (which it, in fact, is), but as monetary correction as they
inflation-indexed some, not all, monetary items as well as all non-monetary items. This was done very successfully during 30 years in Brazil under different governments and with different daily indices without the implementation of IAS 29. This was not done during 14 years of hyperinflation in Zimbabwe with the last 8 years with full implementation of IAS 29 and the Zimbabwe economy imploded on 20 November 2008 - with full implementation of IAS 29.
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