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Thursday, 5 September 2013

IASB claiming that changes in the carrying amounts of NON-MONETARY items are recognised as MONETARY gain or loss


IASB claiming that changes in the carrying amounts of NON-MONETARY items are recognised as MONETARY gain or loss




1. In paragraph 6 it is stated:


“On the basis of our discussions with the submitter, we understand that the main differences between financial statements prepared using IAS 29 and those prepared using the CMUCPP are:

(a) the scope of monetary items; for example, trade receivables and
payables. These are classified as monetary items under IAS 29 but are
classified as non-monetary items under the CMUCPP. This difference
gives rise to a difference in the amount of net monetary gain or loss.
This is because, under both the CMUCPP and IAS 29, non-monetary
items are restated with changes in the carrying amounts being recognised as monetary gain or loss while monetary items are not restated; and” (I added bold type and underlining).


The part in bold type and underlined is not correct.


Changes in the carrying amounts of non-montary items are never recognised as monetary gain or loss under either Capital Maintenance in Units of Constant Purchasing Power or IAS 29.

Both CMUCPP and IAS 29 implement financial capital maintenance in units of constant purchasing power: CMUCPP in terms of a Daily Index (see several country Daily CPIs in the right side-bar) and IAS 29 in terms of the monthly published CPI as required in IFRS. IAS 29 had no positive effect during the 8 years it was implemented in Zimbabwe. The IASB refuses to acknowledge this very well known fact.

Changes in the real value (constant purchasing power) of monetary items - to the extent they are not linked to a general price level - during inflation and deflation are recognised as a net monetary gain or loss under both CMUCPP and IAS 29.

Nicolaas Smith 

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