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Saturday, 11 May 2013

Different forms of Capital Maintenance in Units of Constant Purchasing Power


The following are all forms of Capital Maintenance in Units of Purchasing Power:

·         Indexation of non-monetary items (including equity) in countries with high or hyperinflation.

·         Monetary correction  of non-monetary items (including equity) in countries with high or hyperinflation.

·         Price-level accounting

·         Price-level restatement of non-monetary items (including equity) in countries with high or hyperinflation.

·         Restatement of Historical Cost or Current Cost financial statements in terms of the measuring unit current at the balance sheet date during hyperinflation (IAS 29).

None of the above would result in ideal Capital Maintenance in Units of Constant Purchasing Power with 100 percent of the constant purchasing power of equity and current year profits/losses maintained without the implementation of a daily index (e.g., the Daily CPI) which generally recognizes all changes in the general price level.

Updated on 13-05-2013
 
Nicolaas Smith

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