IFRS and US GAAP authorised CMUCPP maintains the constant purchasing power of constant real value non-monetary items (e.g. capital, all items in shareholders´ equity, provisions, salaries, wages, pensions, taxes, trade debtors/creditors, etc) in terms of a Daily CPI in entities that at least break even in real value during low and high inflation, hyperinflation and deflation - ceteris paribus. European Accounting Assoc: "Capital maintenance is a competing objective of financial reporting."
Strengths of the CIPPA approach during hyperinflation compared to IAS 29
Strengths of the CIPPA approach during
hyperinflation compared to IAS 29
1.It automatically maintains the constant purchasing power of
capital constant for an indefinite period of time in all entities that at least
break even in real value during hyperinflation – ceteris paribus: more or less the same as what Brazil did during
30 years of daily indexing of all non-monetary items from 1964 to 1994
(completely ignored by the IASB in the formulation of IAS 29).
2.It can right now be implemented by any individual company during
hyperinflation. However, measurement in terms of a daily rate is not yet authorized in IFRS during
hyperinflation. IFRS require the implementation of IAS 29 in terms of the
period-end monthly published CPI during hyperinflation. Although CIPPA was authorized
in IFRS in the original Framework (1989) Par 104 (a) at all levels of inflation
and deflation (including hyperinflation), IAS 8.11 states that a specific
standard takes precedence over the Framework.
3.It can be used
to eliminate the effect of hyperinflation from the entire money supply - zero
inflation - (excluding from actual bank notes and coins which generally make up
about 7% of the money supply during low inflation) only in the case of complete coordination with all money
and other monetary items inflation-adjusted daily in terms of a Daily Index or
daily US Dollar parallel rate during hyperinflation.
Strengths of IAS 29 compared to CIPPA during
1.No strengths when implemented, but, it is required by IFRS during
hyperinflation for companies to state they are doing their financial reporting
in terms of IFRS.
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