The concept of a constant real value non-monetary item is derived in IFRS

The concept of a constant real value non-monetary item is derived in IFRS

The original Framework (1989), Par. 104 (a) [now the Conceptual Framework (2010), Par. 4.59 (a)] states: ‘Financial capital maintenance can be measured in either nominal monetary units or units of constant purchasing power.’ When financial capital maintenance is measured in units of constant purchasing power it means, in principle, that certain economic items have constant real values over time.

Everybody will agree that this certainly does not refer to monetary items. Thus, certain non–monetary items are constant real value non–monetary items, e.g. pensions, salaries, wages, rentals, all other income statement items, issued share capital, share premium accounts, share discount accounts, capital reserves, all other items in shareholders´ equity, trade debtors, trade creditors, dividends payable, dividends receivable, deferred tax assets, deferred tax liabilities, all taxes payable, all taxes receivable, all other non-monetary payables, all other non-monetary receivables, provisions, etc.

On the other hand: non–monetary items which are not constant real value non–monetary items are thus variable real value non–monetary items valued in terms of IFRS (excluding the stable measuring unit assumption and the two definitions of monetary items which need to be improved), e.g. property, plant, equipment, inventory, shares, foreign exchange, etc.

Nicolaas Smith

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