Example of Daily
versus monthly CPI under IAS 29
The following are data showing a derived
monthly CPI and Daily CPI for Zimbabwe from 1 November 2007 till 31 December
2007 based on actual monthly inflation percentages. Only the monthly inflation
information is actual data from the Central Bank of Zimbabwe. The rest are all
theoretically derived data.
|
Application
of IAS 29 and CMUCPP using data from Zimbabwe
|
||||||||||||||||||
|
Monthly inflation rates reported by the CB of Zimbabwe from Mar 2007 till
July 2008 (Steve Hanke article)
|
||||||||||||||||||
|
Date
|
Derived relatively stable
foreign curreny rate
|
Mnthly
|
Derived Monthly CPI on
month-end
|
|||||||||||||||
|
ZimDollars per 1 US Dollar
|
Inflation %
|
URV based Daily
Index on other days
|
||||||||||||||||
|
Zim$/USD rate based on derived
CPI
|
Month-end Daily Index assumed =
CPI
|
|||||||||||||||||
|
01/nov/07
|
43,8769
|
4 387,69
|
||||||||||||||||
|
02/nov/07
|
45,7184
|
4 571,84
|
||||||||||||||||
|
03/nov/07
|
47,5598
|
4 755,98
|
||||||||||||||||
|
04/nov/07
|
49,4012
|
4 940,12
|
||||||||||||||||
|
05/nov/07
|
51,2427
|
5 124,27
|
||||||||||||||||
|
06/nov/07
|
53,0841
|
5 308,41
|
||||||||||||||||
|
07/nov/07
|
54,9256
|
5 492,56
|
||||||||||||||||
|
08/nov/07
|
56,7670
|
5 676,70
|
||||||||||||||||
|
09/nov/07
|
58,6084
|
5 860,84
|
||||||||||||||||
|
10/nov/07
|
60,4499
|
6 044,99
|
||||||||||||||||
|
11/nov/07
|
62,2913
|
6 229,13
|
||||||||||||||||
|
12/nov/07
|
64,1327
|
6 413,27
|
||||||||||||||||
|
13/nov/07
|
65,9742
|
6 597,42
|
||||||||||||||||
|
14/nov/07
|
67,8156
|
6 781,56
|
||||||||||||||||
|
15/nov/07
|
69,6570
|
6 965,70
|
||||||||||||||||
|
16/nov/07
|
71,4985
|
7 149,85
|
||||||||||||||||
|
17/nov/07
|
73,3399
|
7 333,99
|
||||||||||||||||
|
18/nov/07
|
75,1813
|
7 518,13
|
||||||||||||||||
|
19/nov/07
|
77,0228
|
7 702,28
|
||||||||||||||||
|
20/nov/07
|
78,8642
|
7 886,42
|
||||||||||||||||
|
21/nov/07
|
80,7056
|
8 070,56
|
||||||||||||||||
|
22/nov/07
|
82,5471
|
8 254,71
|
||||||||||||||||
|
23/nov/07
|
84,3885
|
8 438,85
|
||||||||||||||||
|
24/nov/07
|
86,2300
|
8 623,00
|
||||||||||||||||
|
25/nov/07
|
88,0714
|
8 807,14
|
||||||||||||||||
|
26/nov/07
|
89,9128
|
8 991,28
|
||||||||||||||||
|
27/nov/07
|
91,7543
|
9 175,43
|
||||||||||||||||
|
28/nov/07
|
93,5957
|
9 359,57
|
||||||||||||||||
|
29/nov/07
|
95,4371
|
9 543,71
|
||||||||||||||||
|
30/nov/07
|
97,2786
|
131,42
|
9 727,86
|
|||||||||||||||
|
01/dez/07
|
104,8117
|
10 481,17
|
||||||||||||||||
|
02/dez/07
|
112,3448
|
11 234,48
|
||||||||||||||||
|
03/dez/07
|
119,8779
|
11 987,79
|
||||||||||||||||
|
04/dez/07
|
127,4111
|
12 741,11
|
||||||||||||||||
|
05/dez/07
|
134,9442
|
13 494,42
|
||||||||||||||||
|
06/dez/07
|
142,4773
|
14 247,73
|
||||||||||||||||
|
07/dez/07
|
150,0105
|
15 001,05
|
||||||||||||||||
|
08/dez/07
|
157,5436
|
15 754,36
|
||||||||||||||||
|
09/dez/07
|
165,0767
|
16 507,67
|
||||||||||||||||
|
10/dez/07
|
172,6098
|
17 260,98
|
||||||||||||||||
|
11/dez/07
|
180,1430
|
18 014,30
|
||||||||||||||||
|
12/dez/07
|
187,6761
|
18 767,61
|
||||||||||||||||
|
13/dez/07
|
195,2092
|
19 520,92
|
||||||||||||||||
|
14/dez/07
|
202,7423
|
20 274,23
|
||||||||||||||||
|
15/dez/07
|
210,2755
|
21 027,55
|
||||||||||||||||
|
16/dez/07
|
217,8086
|
21 780,86
|
||||||||||||||||
|
17/dez/07
|
225,3417
|
22 534,17
|
||||||||||||||||
|
18/dez/07
|
232,8749
|
23 287,49
|
||||||||||||||||
|
19/dez/07
|
240,4080
|
24 040,80
|
||||||||||||||||
|
20/dez/07
|
247,9411
|
24 794,11
|
||||||||||||||||
|
21/dez/07
|
255,4742
|
25 547,42
|
||||||||||||||||
|
22/dez/07
|
263,0074
|
26 300,74
|
||||||||||||||||
|
23/dez/07
|
270,5405
|
27 054,05
|
||||||||||||||||
|
24/dez/07
|
278,0736
|
27 807,36
|
||||||||||||||||
|
25/dez/07
|
285,6067
|
28 560,67
|
||||||||||||||||
|
26/dez/07
|
293,1399
|
29 313,99
|
||||||||||||||||
|
27/dez/07
|
300,6730
|
30 067,30
|
||||||||||||||||
|
28/dez/07
|
308,2061
|
30 820,61
|
||||||||||||||||
|
29/dez/07
|
315,7392
|
31 573,92
|
||||||||||||||||
|
30/dez/07
|
323,2724
|
32 327,24
|
||||||||||||||||
|
31/dez/07
|
330,8055
|
240,06
|
33 080,55
|
|||||||||||||||
Example
Zimbabwean company formed on 1 November
2007 with USD 1000 in capital invested on day one in stock and sold on day one
with a 300 percent markup. IAS 29 applied in terms of the monthly CPI and the
Daily CPI.
|
Hist Cost
|
|||||||
|
Date
|
Dr
|
Cr
|
Dr
|
Cr
|
|||
|
USD
|
USD
|
Zim$
|
Zim$
|
||||
|
1/11/07
|
Capital
|
1000
|
43 877
|
||||
|
1/11/07
|
Stock
|
1000
|
43 877
|
||||
|
1/11/07
|
Bank
|
4000
|
175 508
|
||||
|
1/11/07
|
Sales
|
4000
|
175 508
|
||||
|
30/11/07
|
|||||||
|
31/12/07
|
P+L – CoS
|
1000
|
43 877
|
||||
|
31/12/07
|
Stock
|
1000
|
43 877
|
||||
|
|
|||||||
|
31/12/07
|
Sale
|
4000
|
175 508
|
||||
|
31/12/07
|
P+L – Sales
|
4000
|
175 508
|
||||
|
31/12/07
|
Net Monetary Loss
|
-
|
-
|
-
|
-
|
||
|
31/12/07
|
P+L - Net Mon Loss
|
-
|
-
|
-
|
-
|
||
|
31/12/07
|
Net Monetary Loss
|
-
|
-
|
-
|
-
|
||
|
31/12/07
|
Ret Profit/Loss
|
3000
|
131 631
|
||||
|
31/12/07
|
P+L - Ret
Profit/Loss
|
3000
|
|||||
|
Profit
|
Profit
|
||||||
|
IAS 29 with monthly CPI
|
||||||
|
Date
|
Daily CPI
|
Z$/USD
|
Conv
|
Dr
|
Cr
|
|
|
Derived
|
Derived
|
Factor
|
Zim$
|
Zim$
|
||
|
1/11/07
|
4 387,69
|
43,8769
|
Capital
|
3,40
|
149 208
|
|
|
1/11/07
|
4 387,69
|
43,8769
|
Stock
|
3,40
|
149 208
|
|
|
1/11/07
|
4 387,69
|
43,8769
|
Bank
|
1,00
|
175 508
|
|
|
1/11/07
|
4 387,69
|
43,8769
|
Sales
|
3,40
|
596 831
|
|
|
30/11/07
|
9
727,86
|
97,2786
|
3,40
|
|||
|
31/12/07
|
33 080,55
|
330,8055
|
P+L – CoS
|
3,40
|
149 208
|
|
|
31/12/07
|
33 080,55
|
330,8055
|
Stock
|
3,40
|
149 208
|
|
|
|
||||||
|
31/12/07
|
33 080,55
|
330,8055
|
Sales
|
3,40
|
596 831
|
|
|
31/12/07
|
33 080,55
|
330,8055
|
P+L - Sales
|
3,40
|
596 831
|
|
|
31/12/07
|
33 080,55
|
330,8055
|
Net Monetary Loss
|
421 322
|
||
|
31/12/07
|
33 080,55
|
330,8055
|
P+L - Net Mon Loss
|
421 322
|
||
|
31/12/07
|
33 080,55
|
330,8055
|
Net Monetary Loss
|
421 322
|
||
|
31/12/07
|
33 080,55
|
330,8055
|
Ret Profit/Loss
|
26 301
|
||
|
31/12/07
|
33 080,55
|
330,8055
|
P+L - Ret
Profit/Loss
|
26 301
|
||
|
1 939 700
|
1 939 700
|
|||||
|
Profit
|
||||||
|
IAS 29 with Daily CPI
|
||||||
|
Date
|
Daily CPI
|
Z$/USD
|
Conv
|
Dr
|
Cr
|
|
|
Derived
|
Derived
|
Factor
|
Zim$
|
Zim$
|
||
|
1/11/07
|
4 387,69
|
43,8769
|
Capital
|
7,54
|
330 806
|
|
|
1/11/07
|
4 387,69
|
43,8769
|
Stock
|
7,54
|
330 806
|
|
|
1/11/07
|
4 387,69
|
43,8769
|
Bank
|
1,00
|
175 508
|
|
|
1/11/07
|
4 387,69
|
43,8769
|
Sales
|
7,54
|
1 323 222
|
|
|
30/11/07
|
9 727,86
|
97,2786
|
||||
|
31/12/07
|
33 080,55
|
330,8055
|
P+L - CoS
|
7,54
|
330 806
|
|
|
31/12/07
|
33 080,55
|
330,8055
|
Stock
|
7,54
|
330 806
|
|
|
|
||||||
|
31/12/07
|
33 080,55
|
330,8055
|
Sales
|
7,54
|
1 323 222
|
|
|
31/12/07
|
33 080,55
|
330,8055
|
P+L - Sales
|
7,54
|
1 323 222
|
|
|
31/12/07
|
33 080,55
|
330,8055
|
Net Monetary Loss
|
7,54
|
1 147 714
|
|
|
31/12/07
|
33 080,55
|
330,8055
|
P+L - Net Mon Loss
|
7,54
|
1 147 714
|
|
|
31/12/07
|
33 080,55
|
330,8055
|
Net Monetary Loss
|
7,54
|
1 147 714
|
|
|
31/12/07
|
33 080,55
|
330,8055
|
Ret Profit/Loss
|
155 298
|
||
|
31/12/07
|
33 080,55
|
330,8055
|
P+L - Ret
Profit/Loss
|
155 298
|
||
|
4 611 067
|
4 611 067
|
|||||
|
Loss
|
||||||
From the above examples we can see that the
results under IAS 29 with a Daily CPI is different from IAS 29 with the monthly
CPI. The Daily CPI data show what really happened.
When all sales are for cash, net equity
will be the same under both the monthly and Daily CPI. This is only the case
when all sales are only for cash.
Under IAS 29 applying HC principles, sales
for cash and on credit would have the same result. Debtors are monetary items
under HCA and as IAS 29 is implemented. Not under CMUCPP in terms of a Daily
CPI. Debtors are constant real value non-monetary items under CMUCPP since they
are always linked to non-monetary items and the result would be the same as in
USD: no loss at all in the real value of Debtors, i.e., no Net Constant
Purchasing Power Loss that is calculated in the same way as the Net Monetary
Loss. Profit would be better than in USD. Ideal CMUCPP results in zero erosion
of real value, i.e., the same as under zero inflation. There is still erosion
of real value in USD since USD accounts assumes the low inflation in the USD
does not exist, i.e., the HC stable measuring unit assumption is applied.
Ideal CMUCPP in terms of a Daily Index
would result in actual zero erosion of real value in all entities that at least
break even in real value – ceteris
paribus – at all levels of inflation and deflation.
Copyright (c) 2005-2013 Nicolaas J Smith. All rights reserved. No reproduction without permission.
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