The Argentinean Accounting Federation submitted a research paper to the IASB in 2010 in the form of a proposed new IFRS named IFRS 'X' INFLATION in which they proposed that entities should perform restatements of their financial statements when:
(a) the cumulative inflation rate of its functional currency for the last 12 months
is higher or equal to 10%; or
(b) the cumulative inflation rate of its functional currency for the last 36 months
is higher or equal to 26%; or
(c) the preceding financial statements were restated and the cumulative inflation
rate of its functional currency has not been lower than 15% for the last 36
The Argentinean Federation thus wants the IASB to do what the Federation thinks it cannot do on its own.
The IASB and the Argentinean Federation made the proposal available to me and I amended it (via an unsolicited comment letter to the IASB) to IFRS ‘X’ CAPITAL MAINTENANCE IN UNITS OF CONSTANT PURCHASING POWER. The amended version would require an end to HCA: a fundamental change from HCA to financial capital maintenance in units of constant purchasing power (Constant Item Purchasing Power Accounting) as originally authorized in IFRS in the Framework (1989), Par. 104 (a) at annual inflation equal to or higher than 10 per cent or cumulative inflation equal to or higher than 26 per cent over three years with no return to HCA afterwards at any level of inflation or deflation.
Afterwards I realized that all Argentinean companies could right now freely choose to implement financial capital maintenance in units of constant purchasing power because it was authorized in IFRS in 1989.
I then suggested to the Argentinean Accounting Federation (Federación Argentina de Consejos Profesionales de Ciencias Económicas) that they should simply authorize a national accounting standard in Argentina requiring Argentinean companies to implement financial capital maintenance in units of constant purchasing power in terms of their amended proposal at annual inflation equal to or greater than 10 per cent per annum or cumulative inflation equal to or greater than 26 per cent over three years with no future return to HCA.
Implementation is not required in IFRS, but it is authorized. Argentina should simple require it.
They would be requiring something that was authorized in IFRS in 1989.
In my opinion Argentina should end HCA in this manner when it is taken into account that financial capital maintenance in units of constant purchasing power would automatically maintain the constant purchasing power of capital constant for an indefinite period of time in all Argentinean entities that at least break even in real value at all levels of inflation and deflation – ceteris paribus- whether they own any revaluable fixed assets or not.
What is your opinion?
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