Friday, 21 May 2010

Something no-one can disprove

Continuous financial capital maintenance in units of constant purchasing power as authorized in International Financial Reporting Standards in the Framework, Par 104 (a) in 1989, is really about finally stopping Historical Cost Accounting although that was not the intention when this project was started in 1995 in Angola: it is simply the natural conclusion of this process.

It is clearly proven – and no-one can disprove – that SA accountants continuously unknowingly destroy a significant amount of real value in the real economy with traditional Historical Cost Accounting each and every year in the real value of that portion of their company´s shareholders´ equity not backed by revaluable fixed assets in terms of HCA during low inflation.

Everybody still blames the destruction of companies´ capital and profits on inflation – something accountants have no control over.

It is undeniably proven that it is not inflation but SA accountants who unknowingly do the destroying with their stable measuring unit assumption (HCA) – something they have complete control over: they can freely reject the stable measuring unit assumption any time they want and they can freely implement financial capital maintenance in units of constant purchasing power during low inflation and deflation as authorized by the IASB in the Framework, Par 104 (a) twenty one years ago.

Kindest regards

Nicolaas Smith

Copyright © 2010 Nicolaas J Smith

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