IFRS and US GAAP authorised CMUCPP maintains the constant purchasing power of constant real value non-monetary items (e.g. capital, all items in shareholders´ equity, provisions, salaries, wages, pensions, taxes, trade debtors/creditors, etc) in terms of a Daily CPI in entities that at least break even in real value during low and high inflation, hyperinflation and deflation - ceteris paribus. European Accounting Assoc: "Capital maintenance is a competing objective of financial reporting."
Understanding IAS 29 per PricewaterhouseCoopers: Corrections 14 and 15: Daily indexing is required
Understanding IAS 29 per
PricewaterhouseCoopers: Corrections 14 and 15: Daily indexing is required
‘Benefits of purchasing power
adjusted financial statements
Financial statements that are expressed under IAS 29 in a measuring unit
that is current at the balance sheet date provide several benefits:
• They provide management, shareholders and other users with comparable
information from period to period, relating to the underlying results of
operations, capital maintenance and trends in performance;’
Under IAS 29 in terms of the monthly published CPI
(the way PricewaterhouseCoopers advises its clients to implement IAS 29), a
part of the real value of the underlying profit made during the current year is
eroded/destroyed. IAS 29 in terms of the monthly CPI does not provide this
information. IAS 29 in terms of the monthly CPI causes this to happen as
PricewaterhouseCoopers advises its clients.
IAS 29 in terms of the Daily CPI maintains 100 per
cent of the real value of trading profit made during the current year. PricewaterhouseCoopers
does not advise clients to use the Daily CPI because PricewaterhouseCoopers
does not understand that IAS 29 is not about making financial statements more
meaning full via “restatement”, but about capital maintenance in units of
constant purchasing power during hyperinflation as authorized in IFRS. PricewaterhouseCoopers
does not understand the concept of capital maintenance in units of constant
purchasing power as authorized in IFRS. PricewaterhouseCoopers still believes
that the “restatement” of financial statements as it advises its clients to do
will maintain the real value of capital constant.
From Correction 14 it is clear that the real value of
capital is not maintained under IAS 29 in terms of the monthly CPI. The way
PricewaterhouseCoopers advises its clients to implement IAS 29 causes them to
erode/destroy a part of the real value of their capital.
It is a very well-known fact that IAS 29 was
implemented during the last eight years of hyperinflation in Zimbabwe with
absolutely no positive effect: Zimbabwe´s economy imploded on 20 November 2008
with full implementation of IAS 29.
Brazil implemented daily indexation of all
non-monetary and some monetary items during 30 years (1964 to 1994) of very
high and hyperinflation in terms of a government supplied daily index almost
entirely based on the daily US Dollar exchange rate. Daily indexation is not a
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