Criticisms of IFRS

1. IASB refusal to require Daily Indexing in IAS 29

IAS 29 Financial Reporting in Hyperinflationary Economies, which gives guidance regarding the implementation of capital maintenance in units of constant purchasing power during hyperinflation, does not actually result in such capital maintenance being achieved in practice. This was clearly demonstrated during the 8 years it was implemented in Zimbabwe´s hyperinflationary economy with no positive effect at all. The reason being that IAS 29 does not require the use of the Daily CPI which is the only way such capital maintenance can be achieved using a fiat local currency. The IASB refuses to urgently review IAS 29 to require the use of the Daily CPI despite consistent requests for such a review and despite the fact that such a change would help countries like Venezuela and Belarus to stabilize their non-monetary economies very similar to the way it was done in Brazil from 1964 to 1994 with the use of a Daily Index: especially the very successful Unidade Real de Valor Daily Index used in Brazil in 1994.

2. IASB refusal to recognize the 100-year-old use of the Units of Constant Purchasing Power Measurement Basis under HCA

The IASB ignores measurement in units of constant purchasing power as a measurement basis to update certain expenses (e.g., salaries, wages, etc.) and certain prices (e.g., utilities) under the Historical Cost Accounting model (under the HC paradigm) in the Measurement section of the Conceptual Framework despite the fact that all entities (including the IFRS Foundation) that used HCA over the last 100 years, implemented it, all HCA entities (including the IFRS Foundation) use it today and all HCA entities (including the IFRS Foundation) will use it in the future.

3. IASB refusal to deal with the UCPP paradigm under Measurement in the CF

The IASB refuses to deal with the Units of Constant Purchasing Power paradigm under the Measurement section in the Conceptual Framework despite the fact that it has been used for 25 years in IFRS in IAS 29 and despite the fact that it is specifically defined in the Capital Maintenance section of the Conceptual Framework which specifically states: "Financial capital maintenance can be measured in either nominal monetary units or units of constant purchasing power".

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