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Friday 6 September 2013

IAS 29 could stabilise the Venezuelan constant item economy

IAS 29 could stabilise the Venezuelan constant item economy


I am not proposing accounting dollarization in Venezuela as I invented and used it in Angola in 1996. I am also not proposing using the US Dollar´s daily rate as the Daily Index in Venezuela because I know that is illegal.

I am trying to get the IASB to understand capital maintenance in units of constant purchasing power in terms of a DAILY INDEX. Using a DAILY INDEX is what makes indexing or monetary correction or price level restatement - which are all forms of capital maintenance in units of constant purchasing power - work. The IASB does not understand that.

Latin American countries used it, but also did not understand the fundamentals involved. They did the right thing instinctively, like street vendors update their prices daily in terms of the US Dollar daily parallel rate during hyperinflation in all hyperinflationary economies.

If I could get the IASB to REQUIRE daily indexing in terms of the Daily CPI in IAS 29 it would be magic for Venezuela. It would stabilise Venezuela´s constant real value non-monetary economy in a very short period of time. It appears revolutionary because it would REQUIRE salaries, wages, rents, transport fees, all administered prices to be updated DAILY in terms of the Daily CPI. That is what Brazil and other LA countries did from 1964 till 1994.

This would not come from the Venezuelan government. It would come as a REQUIREMENT from the IASB via the implementation of IAS 29 which companies in Venezuela have been implementing since 2009.

The IASB knows very little about capital maintenance in units of constant purchasing power in terms of a daily index. Currently the IASB staff is attempting to ban its use during low and high inflation. Unbelievable, but true.


Nicolaas Smith Copyright (c) 2005-2013 Nicolaas J Smith. All rights reserved. No reproduction without permission.

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