The
FASB and IASB spent several years discussing measurement around the world
during the Measurement Chapter of their Joint Conceptual Framework Project.
After
several years of discussions around the world they published the following joint
list of possible basic measurement bases:
"The
Boards agreed to the following set of nine measurement basis candidates:
1.
Past entry price
2.
Past exit price
3.
Modified past amount
4.
Current entry price
5.
Current exit price
6.
Current equilibrium price
7.
Value in use
8.
Future entry price
9.
Future exit price.”
It
can be seen from the above FASB and IASB list that neither
(i)
measurement
(of monetary items) in terms of the Daily Consumer Price Index nor
(ii)
measurement
in units of constant purchasing power
are
considered by both the FASB and the IASB as possible basic measurement bases to
be included on their list.
Measurement
in units of constant purchasing power is thus currently (2012) excluded as a possible
basic measurement basis by both the FASB and IASB.
It
is to be noted that financial capital maintenance in units of constant
purchasing power as an alternative to HCA (see above) automatically maintains
the existing constant purchasing power of capital constant for an indefinite
period of time in all entities that at least break even in real value – ceteris paribus – at all levels of
inflation and deflation.
The
omission of measurement in units of constant purchasing power from the FASB´s
and IASB´s joint list of possible basic measurement bases is thus noted with concern.
It is difficult to come up with a plausible explanation why both the FASB and
the IASB exclude measurement in units of constant purchasing power as a
possible basic measurement basis.
The
fact that financial capital maintenance in units of constant purchasing power
is authorized in IFRS in the Framework since 1989 would normally result in it automatically
being included in a list of possible basic measurement bases. However, after
several years of international discussion both the FASB and IASB do not regard
measurement in units of constant purchasing power as a possible basic
measurement basis.
A
healthy and robust discussion and publication of different viewpoints and
research are good for the ongoing development of the understanding of the basic
concepts of accounting / financial reporting at the FASB, IASB and elsewhere.
However,
excluding measurement in units of constant purhasing power from the current
(2012) list of possible basic measurement bases is not compatible with the
development of high quality international accounting standards.
Nicolaas
Smith
Copyright
(c) 2012 Nicolaas Johannes Smith. All rights reserved. No reproduction without
permission.
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