According to the IASB financial reporting has NO EFFECT on the economy

Financial reporting ALWAYS AFFECTS the economy since the economy is made up of economic entities and economic items and an entity has to choose an accounting model which is determined by the capital maintenance concept and measurement bases chosen as per the Conceptual Framework.

Most entities choose the financial capital maintenance in nominal monetary units (Historical Cost) concept.

Both IFRS and US GAAP also authorise capital maintenance in units of constant purchasing power at all levels of inflation and deflation.

The IASB staff, under the direction of Michael Stewart, are currently guiding the IASB Interpretations Commitee to ban financial capital maintenance in units of constant purchasing power during low and high inflation and deflation.

Accounting is a measurement instrument according to David Mosso.

IASB view

According to the IASB "financial reporting has NO EFFECT on the economy" as stated by Michael Stewart, Director of Implementation Activities at the IASB, on 8 January 2013 in London.


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