Currency can be monetary or non-monetary

FOREIGN CURRENCY

A currency as a foreign currency outside its local, non-dollarized economy is a variable real value non-monetary item and its value is determined in the forex markets compared to other foreign currencies. A currency as a foreign currency´s price (real value) outside its local economy is determined second by second in the forex markets.


Foreign currency losses and gains

Foreign exchange losses and gains are calculated and accounted in terms of IFRS under both the traditional Historical Cost Accounting model under the Historical Cost paradigm and under financial capital maintenance in units of constant purchasing power in terms of IFRs under the Units of Constant Purchasing Power paradigm, the second accounting paradigm authorized under IFRS since April, 1989. 

LOCAL CURRENCY

A currency as a local currency - in a non-dollarized economy - is a monetary item and its local real value within its local economy is determined by inflation or deflation. 

A local currency´s real value in a non-dollarized economy is determined by the DAILY change in the general price level within its local economy. It changes at least once per day. It is indicated by the change in the DAILY CPI. It can change more than once per day during hyperinflation. During hyperinflation its real local value is determined by the daily US Dollar parallel rate when no Daily CPI is available. 

Historical Cost Accounting

Net monetary losses and gains in a local currency in a non-dollarized economy are NOT calculated and accounted under the traditional Historical Cost Accounting model. 

The stable measuring unit assumption is implemented under HCA. For example, the real value of issued share capital is never updated and entities do not know whether they have ever maintained or are maintaining the real value (constant purchasing power) of issued share capital over the life of the entity.

FINANCIAL CAPITAL MAINTENANCE IN UNITS OF CONSTANT PURCHASING POWER

Totally useless IAS 29 Financial Reporting in Hyperinflationary Economies

Net monetary losses and gains in a hyperinflationary local currency are calculated and accounted during hyperinflation under financial capital maintenance in units of constant purchasing power implemented in terms of the totally useless IAS 29 Financial Reporting in Hyperinflationary Economies. 

The stable measuring unit assumption is still implemented on non-month-end days under the totally useless IAS 29 since the monthly published CPI is mistakenly used when only the use of the DAILY CPI will result in actual capital maintenance in units of constant purchasing power. The result of this is that the constant purchasing power (real value) of capital is not maintained under this totally useless standard.

IASB

The International Accounting Standards Board continues to refuse to change the totally useless IAS 29 to REQUIRE the use of the Daily CPI despite the fact that most accountants in the world (excluding the ones at the IASB) acknowledge that it is absolutely clear to any person with common sense that IAS 29 had no positive effect in Zimbabwe. The totally useless IAS 29 had no positive effect during the 8 years it was implemented in Zimbabwe´s hyperinflationary economy since that economy imploded on 20 November 2008 with full implementation of IAS 29 over that period. The IASB is the only entity in the world who refuses to acknowledge that the totally useless IAS 29 had no positive effect during the 8 years it was implemented in Zimbabwe´s hyperinflationary economy. The totally useless IAS 29 is currently having no positive effect in the Venezuelan and Belarus economies.

Capital Maintenance in Units of Constant Purchasing Power

Net monetary losses and gains in a local currency in a non-dollarized economy are calculated and accounted under the Capital Maintenance in Units of Constant Purchasing Power accounting model at all levels of inflation (low, high and hyperinflation) and deflation. 

The stable measuring unit assumption is NEVER implemented under CMUCPP. This results in the constant purchasing power (real value) of all constant real value non-monetary items, including all items in shareholders´ equity, always being maintained constant at all levels of inflation (low, high and hyperinflation) and deflation in all entities that at least break-even in real value, ceteris paribus.

BITCOIN

Bitcoin is never a monetary currency. It is never a monetary item. It is never a unit of measure for accounting purposes. It is only a variable real value non-monetary item and its price changes second by second on the various bitcoin exchanges. 

Nicolaas Smith Copyright (c) 2005-2014 Nicolaas J Smith. All rights reserved. No reproduction without permission.