Monday, 14 January 2013

Financial reporting affects the economy

Financial reporting affects the economy


From the here it is very clear that financial reporting affects the economy.


According to Michael Stewart, the Director of Implementation Activities at the International Accounting Standards Board, financial reporting has no effect in the economy and that is the reason why the IASB is satisfied with the implementation of IAS 29 during 8 years in Zimbabwe´s hyperinflationary economy with no positive effect.


The above indication by Michael Stewart is completely wrong.


It is very strange and very worrying that a senior director at the IASB makes such an indication which, in my opinion, indicates no understanding on the part of Michael Stewart of the effect of financial reporting in the economy. This was certainly the impression to me during the teleconference on 8 January 2013: in my opinion, Michael Stewart has no understanding of the effect of financial reporting in the economy otherwise he would have clearly indicated such understanding during the teleconference which dealt very much with the measurement of economic items in units of constant purchasing power in terms of a Daily Index, i.e., with IFRS-authorised CMUCPP. He indicated the opposite.

Update from Michael Stewart: "In response to comments you made about how you think that CMUCPP would have solved Zimbabwe's hyperinflation problem, I expressed a view about the effect of financial reporting on the economy. As you noted in your blog of 10 January 2013 I expressed a view that it is the actions that people take and the way that they use the information contained in financial reporting that I think can affect an economy, rather than just the financial reporting itself (in retrospect I accept that the language I used could have been more specific to the matter we were discussing, which was about how financial reporting could have solved Zimbabwe's hyperinflation problem)."

Nicolaas Smith

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