Pages

Thursday, 17 April 2014

IASB agrees with silly idea that capital maintenance is only required during high inflation

IASB still clueless about capital maintenance

The IASB now officially agrees with the silly idea that capital maintenance is only required with the onset of high inflation.

After an analysis of the replies to the Discussion Paper: A Review of the Conceptual Framework, the IASB now officially agrees with the silly idea that capital maintenance is only required with the onset of high inflation. 

15 (c) Capital maintenance – Most respondents agreed with the proposal in the Discussion Paper to leave the existing descriptions and the discussion of capital maintenance concepts in the Conceptual Framework largely unchanged until such time as work on accounting for high inflation indicates a need for a change. Consequently, we do not propose to discuss capital maintenance with you unless work on the measurement section of the Exposure Draft highlights a need to discuss the issue further. 

The IASB simply ignores the statement by the Australian accounting authorities that there is a lack of understanding at the IASB regarding the importance of capital maintenance in the accounting framework. 

The IASB also ignores the statement by The European Accounting Association that "Capital maintenance is a competing objective of financial reporting" in their comment to the above Discussion Paper. 

The ignorance of the functioning of capital maintenance in units of constant purchasing power in terms of a DAILY INDEX at the IASB is shocking especially when it is taken into account that by simply making a very small change to IAS 29 Financial Reporting in Hyperinflationary Economies and requiring DAILY indexing instead of applying the monthly published CPI would stabilize the non-monetary economies in hyerinflationary economies in Venezuela and Belarus over a very short time. 

The IASB has absolutely no understanding of what is written in the previous paragraph although I have been trying to explain it to them since January 2012 in IFRS ´X` CAPITAL MAINTENANCE IN UNITS OF CONSTANT PURCHASING POWER.

The IASB is absolutely clueless about the effects of daily indexing on capital maintenance.

I can see why the US Securities and Exchange Commission refuses to agree to the adoption of IFRS in the US economy. The IASB is very intransigent to the detriment of the world economy.

Nicolaas Smith 

Copyright (c) 2005-2014 Nicolaas J Smith. All rights reserved. No reproduction without permission.