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Sunday, 7 February 2010

Value date December 2009

South African Consumer Price Index 109.2 December 2009

Base year 2008 = 100 Table A – All Urban Areas

All items in financial reports dated December 2009 have to be updated or restated or inflation-adjusted in terms of the December 2009 CPI in order to reflect their correct and valid nominal or updated or inflation-adjusted values at the date they are read. Unadjusted December 2009 financial reports are out of date or wrong as from the date the January 2010 CPI is published - if it is different from the December 2009 CPI value. All financial reports not updated or restated or inflation-adjusted every time the CPI changes are - in principle - wrong. They certainly are out of date. Since most financial reports are not published during the period of the CPI for their period-end date, most financial reports are always published, in principle, with wrong values at first publication.

All SA financial reports of SA companies with December year ends published after the January 2010 CPI (with a different value from the 109.2 December 2009 value) is published and these financial reports are not inflation adjusted or restated or updated in terms of the January 2010 CPI value, will be published with wrong values on first publication.

Values in electronic copies will be updated automatically with Real Value Enabler™ - US Patent Applied For - when the necessary technology becomes available.

Example

Assumption: Inflation assumed to remain at 6% per annum in SA for an indefinite period of time.

..............................................Nominal Value........Real Value
.....................................................................at Dec 2009
CPI as at Dec 2009..............109.2.........R100.00.............R100.00

Assumed values for the CPI

Dec 2010........................115.8.........R106.00.............R100.00
Dec 2011........................122.7.........R112.36.............R100.00
Dec 2012........................130.1.........R119.10.............R100.00
Dec 2013........................137.9.........R126.25.............R100.00
Dec 2014........................146.1.........R133.82.............R100.00
Dec 2015........................154.9.........R141.85.............R100.00
Dec 2020........................207.3.........R189.83.............R100.00
Dec 2030........................371.2.........R339.96.............R100.00
Dec 2080......................6 838.2.......R6 262.05.............R100.00


All financial reports, e.g. income statements and balance sheets, dated December 2009 have to be restated as above to be able to be read correctly at the above future dates.

The restated values will not be the assumed real values of the items at the above future dates, but, the real values of the items at December 2009 restated at the assumed future CPI values.

All items in historical financial reports have to be restated every time the CPI changes, not to value them correctly, but, to reflect their real values correctly at the original date of the financial report.

Kindest regards,

Nicolaas Smith

Copyright © 2010 Nicolaas J Smith