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Monday, 27 January 2014

How to fix IAS 29

1. IAS 29 has to require capital maintenance in units of constant purchasing power in terms of an index that follows all - at least DAILY - changes in the general price level. The index has to be the DAILY CPI during low inflation, high inflation, the initial stage of hyperinflation and deflation. The US Dollar DAILY parallel rate has to be used when the DAILY CPI falls too far behind the USD DAILY black market rate which then becomes the general price level. The USD parallel rate can change more than once a day by a huge percentage during severe hyperinflation. All indexed items have to follow ALL changes in the general price level.

2. IAS 29 has to state that trade debtors, trade creditors, all non-monetary payables, all non-monetary receivables, interest, salaries, wages, pensions, taxes, duties, rent, fees, employee benefits, issued share capital, all items in shareholders equity, provisions, all losses and all gains (including foreign exchange losses and gains), etc. are constant real value non-monetary items under capital maintenance in units of constant purchasing power, always and everywhere to be measured in units of constant purchasing power in terms of an index that follows all - at least DAILY - changes in the general price level.

3. IAS 29 has to define monetary items as follows: 

Monetary items constitute the money supply.

4. IAS 29 has to state that once an entity made the paradigm change to the Constant Item Purchasing Power paradigm it is not allowed to ever go back to the Historical Cost paradigm at any level of inflation (low, high or hyperinflation) or deflation. 

Nicolaas Smith 

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