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Tuesday, 7 January 2014

IASB has "a lack of understanding about the fundamental role a capital maintenance concept has within the accounting framework"


CPA Australia and the Institute of Chartered Accountants Australia´s comment letter to the IASB´s Conceptual Framework Discussion Paper

Question 26 

Capital maintenance 

Capital maintenance is discussed in paragraphs 9.45–9.54. The IASB plans to include the existing descriptions and the discussion of capital maintenance concepts in the revised Conceptual Framework largely unchanged until such time as a new or revised Standard on accounting for high inflation indicates a need for change. 

Do you agree? Why or why not? Please explain your reasons. 

In our response to Question 11 above we stated our view that the Conceptual Framework should articulate an ideal concept of capital maintenance and its relationship to the ideal measurement base. 

Accordingly, we do not support the proposal that leaves the existing descriptions and discussion of this issue largely unchanged until such time as any project on accounting for high inflation indicates a need for change. 

We think this approach suggests a lack of understanding about the fundamental role a capital maintenance concept has within the accounting framework. We also consider that our current difficulties with profit measurement and OCI, which have issues of capital maintenance at their root clearly indicate a pressing need to resolve these issues. 


The complete comment letter is available HERE dated 2014-01-06 on Page 1.

See also: IASB believes that capital maintenance is only required during high inflation and hyperinflation