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Sunday, 15 September 2013

IASB kills the Argentinian Accounting Federation´s 2010 proposal for an IFRS requiring restatement as from 10% inflation per annum

IASB kills the Argentinian Accounting Federation´s 2010 proposal for  an IFRS requiring restatement as from 10% inflation per annum

The Argentinian Accounting Federation in collaboration with the accounting authorities of Brazil, Mexico and Chile sent the IASB a proposal in 2010 entitled IFRS "X" INFLATION which the IASB was going to use as the basis for a research project on Financial Reporting in High Inflationary Economies. IFRS "X" INFLATION was based on restatement, i.e., financial capital maintenance in units of constant purchasing power in terms of the monthly CPI, in economies with annual inflation above 10 percent per annum or 26 percent cumulative inflation over three years. 

The IASB has now killed this Argentinian proposal IFRS "X" INFLATION with the following decision at the September 2013 Interpretation Committee´s meeting as reported by Deloitte  in IAS Plus: 

"The answer to the submitter’s question is that it is not permitted to use the financial capital maintenance concept" (defined in terms of constant purchasing power units as proposed in IFRS "X" INFLATION ) "when the entity’s functional currency is not the currency of a hyperinflationary economy as described in IAS 29."

The Deloitte article is about the IFRIC Potential Agenda Item Request regarding: 

Applicability of the concept of financial capital maintenance defined in constant purchasing power units during non-hyperinflationary conditions.

The Argentinian 2010 proposal IFRS "X" INFLATION was for restatement of financial reports, i.e.,  financial capital maintenance in units of constant purchasing power, in economies with annual inflation above 10 per cent per annum or 26 per cent cumulative inflation over three years. 

Covering letter to Sir David Tweedie from the Argentinian Accounting Federation.

The above IASB decision has now killed the Argentinian Federation´s Proposal IFRS "X" INFLATION.

Financial capital maintenance in units of constant purchasing power during non-hyperinflationary conditions is authorised under US GAAP: 


"Two major concepts of capital maintenance exist, both of which can be measured in units of either money or constant purchasing power: the financial capital concept and the physical capital concept."


US GAAP Concepts Statement Nº 6, Par. 71

I submitted amendments to the Argentinian Accounting Federation´s proposal IFRS "X" INFLATION to the IASB in January 2012 in the form of IFRS "X" CAPITAL MAINTENANCE IN UNITS OF CONSTANT PURCHASING POWER.


Nicolaas Smith 

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