IFRS and US GAAP authorised CMUCPP automatically 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) only when updated in terms of the Daily CPI during low and high inflation, hyperinflation and deflation - ceteris paribus. European Accounting Association: "Capital maintenance is a competing objective of financial reporting."
Definition of Capital Maintenance in Units of Constant Purchasing Power
Maintenance in Units of Constant Purchasing Power (CMUCPP) is
the maintenance of the constant purchasing power of capital - capital being
equal to the real value of net assets - for an indefinite period
of time at all levels of inflation and deflation in entities that at least
break even in real value – ceteris
paribus – in units of constant purchasing power in terms of an index that
recognizes all - normally daily - changes in the general price level.
Updated on 13-05-2013
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