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Wednesday 22 September 2010

Fundamental flaws in IFRS and US GAAP

 The stable measuring unit assumption’s rejection during hyperinflation has already been authorized in IAS 29 in 1989 and its rejection during low inflation and deflation has been authorized as an option in the Framework, Par 104 (a), also in 1989.

Bruce Pounder, a highly respected American academic and commentator on IFRS and US GAAP, states that there are various inherent (fundamental) flaws in current IFRS and US GAAP.

Constant items, with the exception of some income statement items, namely salaries, wages, rentals, etc which are, in fact, inflation-adjusted, are valued in nominal monetary units under HCA applying the very destructive stable measuring unit assumption when measuring financial capital maintenance in nominal monetary units during low inflation and deflation. SA accountants unknowingly destroy the real values of constant items never maintained at a rate equal to the annual rate of inflation when they implement their very destructive stable measuring unit assumption during low inflation. This amounts to about R134 billion per annum.
Copyright © 2010 Nicolaas J Smith

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