Not generally accepted but a fact

The IASB approved Framework, Par. 104 (a) which is applicable in this case since there is no specific IFRS relating to the valuation of Issued Share capital, Retained Earnings and other items in Shareholders´ Equity during non-hyperinflationary periods, allows accountants to reject the stable measuring unit assumption during all levels of inflation and deflation when they choose to measure financial capital maintenance in units of constant purchasing power as an alternative to measurement in nominal monetary units as applied in the traditional HCA model.

It is not generally appreciated by accounting authorities and accountants that they are unknowingly and unintentionally responsible for the destruction of the real value of constant real value non-monetary items never or not fully updated or inflation-adjusted or maintained over time when they implement the real value destroying traditional HCA model: more specifically, the very destructive stable measuring unit assumption during periods of inflation when they maintain it for an unlimited period of time during indefinite inflation. This lack of appreciation also applies to economists, business people and the public in general.

It is also not generally appreciated by accounting authorities and accountants that they can stop this destruction by selecting financial capital maintenance in units of constant purchasing power as authorized by the IASB 20 years ago in the Framework, Par. 104 (a) which is applicable in the absence of specific IFRS.

It is generally accepted and a fact that inflation destroys the real value of money (the internal functional currency) and other monetary items over time. It is also generally accepted and a fact that hyperinflation can destroy the real value of a country’s entire monetary base as happened in Zimbabwe recently. That was the result of a massive increase in the volume and nominal value of bank notes in the country by Gideon Gono, the governor of the Reserve Bank of Zimbabwe, with an equivalent extreme rate of destruction of the real value of the Zimbabwe Dollar since the massive nominal increase in ZimDollar money supply was not the result of a concomitant increase in real value in the real or non-monetary economy of Zimbabwe.

“By a continuing process of inflation, governments can confiscate,
secretly and unobserved, an important part of the wealth of their
citizens. By this method they not only confiscate, but they
confiscate arbitrarily; and, while the process impoverishes many,
it actually enriches some.

Lenin was certainly right. There is no subtler, no surer
means of overturning the existing basis of society than to
debauch the currency. The process engages all the hidden forces
of economic law on the side of destruction, and does it in a
manner which not one man in a million is able to diagnose.”

The Economic Consequences of the Peace by John Maynard Keynes
1919
http://socserv2.mcmaster.ca/~econ/ugcm/3ll3/keynes/peace

It is generally accepted and a fact that inflation destroys the real value of the capital amounts of monetary savings and money lent over time.

It is generally accepted, but not a fact, that inflation erodes, which is the same as destroys, the real value of constant real value non-monetary items with fixed nominal payments over time, e.g. fixed salary, wage, rental payments, etc.

The constant real non-monetary values of salaries, wages, rentals, etc are generally maintained, i.e. not destroyed, when accountants choose to measure the real value of these constant real value non-monetary items in units of constant purchasing power in terms of the CPI in most economies with payment in depreciating money during inflation.

It is not generally accepted, but a fact, that SA accountants unknowingly destroy the real value of Retained Earnings of all SA companies and banks over time when they choose to measure financial capital maintenance in nominal monetary units in terms of the real value destroying traditional HCA model during inflation when they maintain the stable measuring unit assumption for an unlimited period of time during indefinite inflation and these companies and banks have no revaluable fixed asset variable items or insufficient revaluable fixed asset variable items to maintain 100% of the updated original real value of all contributions to their Shareholders´ equity.

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