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Showing posts with label IASB should not authorize IFRS based on massively destructive fallacies. Show all posts
Showing posts with label IASB should not authorize IFRS based on massively destructive fallacies. Show all posts

Friday 15 January 2010

IASB should not authorize IFRS based on massively destructive fallacies

There was only one systemic process of real value destruction operating only in the monetary economy before the invention of the Historical Cost Accounting model. The economic process of inflation only destroyed the real value of depreciating money and other depreciating monetary items equally throughout the monetary economy at that time as it does today in economies subject to inflation and hyperinflation.

There was no simultaneous second systemic process, as we experience it today, whereby Historical Cost accountants unknowingly, unnecessarily and unintentionally destroy massive amounts of real value of existing reported constant items never or not fully maintained, e.g. reported retained profits, only in the constant item economy because they implement their very destructive stable measuring unit assumption (one of the two IASB approved very popular accounting fallacies) during low inflation and hyperinflation.

This includes the unknowing destruction by HC accountants of the real values of issued share capital, share premium account and non-distributable reserves in companies without sufficient fixed assets that are or can be revalued via the Revaluation Reserve to maintain these items´ real values under HCA during low inflation. The reason was that the real value destroying traditional Historical Cost Accounting model which includes the very destructive stable measuring unit assumption and financial capital maintenance in nominal monetary units (the very popular accounting fallacies authorized by the IASB in the Framework, Par 104 a in 1989) was not yet invented at that time.

The International Accounting Standards Board is a private, independent accounting standards board. The mission of the IASB is to develop a single set of global accounting standards. The IASB cooperates with national accounting standard boards for international convergence of accounting standards. IASB should not authorize IFRS based on massively destructive accounting fallacies, e.g. financial capital maintenance in nominal monetary units per se and the stable measuring unit assumption during low inflation which cost the SA economy about R200 billion in real value unknowingly destroyed in constant items never maintained by SA accountants implementing HCA in the SA economy each and every year. Currently the IASB is doing that in the Framework, Par 104 (a) which states that financial capital maintenance can be measured in nominal monetary units.

Kindest regards,

Nicolaas Smith