Buy the ebook for $2.99 or £1.53 or €2.68
The
Historical Cost Debate is the debate over the last 100 years or so about the
use of Historical Cost for accounting purposes. The entities realized a long
time ago that financial reports based on Historical Cost for all economic items
do not fairly represent a company’s results and operations. As a result of this
debate the pure Historical Cost accounting model was improved and changed
dramatically during this time, so much so, that today we have a huge volume of
IFRS where under variable real value non–monetary items are not all valued at
HC, but at, e.g., fair value or the lower of cost and net realizable value or
market value or recoverable value or present value, etc. This debate has thus
been a very valid and successful debate regarding the valuation of variable
real value non–monetary items. IFRS mainly refer to variable items.
Unfortunately,
the stable measuring unit assumption is still an IFRS–approved option that is
used for the valuation of most constant items (excluding annual measurement of
salaries, wages, rents, etc. in units of constant purchasing power) during
inflation and deflation. Fortunately, the option of measuring financial capital
maintenance in units
of constant purchasing power during inflation and deflation (CIPPA) was
approved in IFRS in the original Framework (1989), Par. 104 (a).
Entities
value variable items in terms of IFRS when they implement both the traditional
HCA model and when they measure financial capital maintenance in units of
constant purchasing power during inflation and deflation applying CIPPA. The
stable measuring unit assumption is implemented under HCA. It is not to be
implemented under financial capital maintenance in units of constant purchasing
power (CIPPA). The net monetary loss or gain is calculated and accounted
whenever monetary items are not inflation-adjusted daily during the current
financial period under financial capital maintenance in units of constant
purchasing power. The net constant item loss or gain is calculated whenever
constant items are not maintained constant during the current accounting period
under financial capital maintenance in units of constant purchasing power
(CIPPA).
Buy the ebook for $2.99 or £1.53 or €2.68
Nicolaas Smith
Copyright (c) 2005-2012 Nicolaas J Smith. All rights reserved. No reproduction without permission.
No comments:
Post a Comment