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Tuesday, 12 January 2010

Variable items

Variable real value non-monetary items

Variable items are non-monetary items with variable real values over time.

Examples of variable items in today’s economy are property, plant, equipment, inventories, quoted and unquoted shares, raw material stock, finished goods stock, patents, trademarks, foreign exchange, etc: all economic items you see around you except monetary and constant items.

The first economic items were variable real value items. Their values were not yet expressed in terms of money because money was not yet invented at that time.

There was no inflation at that time because there was no money. There was no unstable monetary medium of exchange. There was no unstable monetary unit of account. There was no unstable monetary store of value.

There was no double entry accounting model at that time.

There were no historical cost items, no stable measuring unit assumption, no Historical Cost Accounting model and no financial capital maintenance in nominal monetary units; that is to say: there were no accounting fallacies.

There was no value based accounting.

There was also no Consumer Price Index at that time. Consequently there were no units of constant purchasing power and no price-level accounting.

There was no inflation accounting. There was no Constant Purchasing Power inflation accounting model under which all non-monetary items (variable and constant items) in Historical Cost and Current Cost financial statements are required to be restated by means of the year end CPI during hyperinflation.

There was also no continuous financial capital maintenance option under which only constant items are continuously measured in units of constant purchasing power by applying the monthly CPI during non-hyperinflationary periods in order to implement a continuous financial capital concept of invested purchasing power by continuously measuring financial capital maintenance in units of constant purchasing power and determining profit/loss in constant purchasing power units while variable items are continuously valued in terms of specific International Financial Reporting Standards or South African Generally Accepted Accounting Practice rules at, for example, market value, fair value, present value, recoverable value or net realizable value and monetary items are valued at their always current original nominal monetary values during the reporting period.

There were no financial reports: e.g. no income statements, no balance sheets, no cash flow statements, no statements of changes in Shareholders´ Equity, etc.

There were no monetary items and no constant items. There were only variable real value items not yet expressed in monetary terms.

Kindest regards,

Nicolaas Smith