IAS 29 not required with
Capital Maintenance in Units of Constant Purchasing Power
IFRS
authorised Financial Capital Maintenance in Units of Constant Purchasing Power at
all levels of inflation and
deflation – including during
hyperinflation - as an alternative to Historical Cost Accounting in the
original Framework for the Preparation and Presentation of Financial
Statements, Par. 104 (a) in 1989 – now the Conceptual Framework (2010), Par.
4.59 (a) - which states:
“Financial
capital maintenance can be measured in either nominal monetary units or units of constant purchasing power.”
The
Conceptual Framework, Par. 4.59 (a) does not state that it (Par. 4.59 (a)) only
applies to low inflationary and deflationary economies. It applies to all levels of inflation and
deflation, including during
hyperinflation.
An
entity in a hyperinflationary economy is thus authorised in IFRS to measure financial capital maintenance
in units of constant purchasing power; i.e., authorised in IFRS to implement
Capital Maintenance in Units of Constant Purchasing Power during hyperinflation.
Nicolaas Smith
Copyright (c) 2005-2012 Nicolaas J Smith. All rights reserved. No reproduction without permission.
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