Thursday, 19 November 2009

IASB does not recognize constant items


Non-monetary items are subdivided in

a) Variable real value non-monetary items and
b) Constant real value non-monetary items.

Constant items are non-monetary items with constant real values over time.

IAS 29 clearly defines non-monetary items as per the IASB.

Non-monetary items are all items that are not monetary items. This IASB definition is correct for non-monetary items as a generic term. It is however taken that there are thus only two distinct items in the economy: monetary and non-monetary items. The standard to be applied in hyperinflationary economies, IAS 29, was developed on this basis.

It is not true that there are only two basic economic items as defined by the IASB. There are three fundamentally different basic economic items in the economy:

1. Variable real value non-monetary items
2. Monetary items
3. Constant real value non-monetary items

The IASB does not recognize constant real value non-monetary items directly by name or by definition, but, indirectly by implication. The fact that certain non-monetary items have constant real non-monetary values is implied by the IASB in the Framework for the Preparation and Presentation of Financial Statements which is applicable in the absence of specific IFRS. There is no specific IFRS relating to the concepts of capital or the concepts of capital maintenance. The concepts of capital, the capital maintenance concepts and the measurement bases defined in the Framework are thus applicable.

Kindest regards,

Nicolaas Smith

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