Variable Items

Variable items are non-monetary items with variable real values over time.

Examples of variable items in today’s economy are property, plant, equipment, inventories, quoted and unquoted shares, raw material stock, finished goods stock, patents, trademarks, foreign exchange, etc.

The first economic items were variable real value items. Their values were not yet expressed in terms of money because money was not yet invented at that time. There was no inflation because there was no money. Inflation is always and everywhere a monetary phenomenon. Inflation has no effect on the real value of non-monetary items. There was no unstable monetary medium of exchange. There was no unstable monetary unit of account. There was no unstable monetary store of value.

There was no double entry accounting model at that time. There were no historical cost items. There was no very destructive stable measuring unit assumption approved by the International Accounting Standards Board whereby accountants assume the unit of measure is stable, i.e., they consider that changes in the general purchasing power of money are not sufficiently important to require financial capital maintenance in units of constant purchasing power during low inflation and deflation. The stable measuring unit assumption is based on a very popular accounting fallacy since the real value of money is never absolutely stable on a sustainable basis during inflation and deflation. There was no Historical Cost Accounting model and no financial capital maintenance in nominal monetary units per se (another very popular IFRS-authorized accounting fallacy) during inflation; that is to say: there were no Historical Cost accounting fallacies. There was no value based accounting. There was also no Consumer Price Index at that time. Consequently there were no units of constant purchasing power and no price-level accounting.

There was no International Accounting Standard IAS 29 Financial Reporting in Hyperinflationary Economies supplying us with the current definition of inflation accounting. There was thus no Constant Purchasing Power Accounting (CPPA) IFRS-approved inflation accounting model under which all non-monetary items (variable and constant real value non-monetary items) in Historical Cost and Current Cost financial statements were required to be restated by means of the period-end CPI to make these restated HC and CC financial statements more useful during hyperinflation.

There was also no real value maintaining financial capital maintenance in units of constant purchasing power accounting model – Constant ITEM Purchasing Power Accounting (CIPPA) – as an official IFRS-approved alternative basic accounting model to the traditional HCA model during low inflation and deflation. There was no IFRS compliant basic accounting option where under only constant items are continuously measured in units of constant purchasing power during low inflation and deflation. There was no option of continuously measuring only constant items in units of constant purchasing power by applying the monthly change in the CPI during low inflation and deflation in order to implement a constant purchasing power financial capital concept of invested purchasing power by continuously measuring financial capital maintenance in units of constant purchasing power and continuously determining profit/loss in units of constant purchasing power.

There were no financial reports: e.g. no income statements, no balance sheets, no cash flow statements, no statements of changes in shareholders´ equity, etc. There were no monetary items and no constant items. There were only variable real value items not yet expressed in monetary terms.

Copyright (c) Nicolaas J Smith 2005-2011. All rights reserved. No reproduction without permission.

Fin24 16-3-11

Variable items

Variable items


Variable items are non-monetary items with variable real values over time.

Examples of variable items in today’s economy are property, plant, equipment, inventories, quoted and unquoted shares, raw material stock, finished goods stock, patents, trademarks, foreign exchange, etc.

The first economic items were variable real value items. Their values were not yet expressed in terms of money because money was not yet invented at that time. There was no inflation because there was no money. Inflation is always and everywhere a monetary phenomenon. Inflation has no effect on the real value of non-monetary items. There was no unstable monetary medium of exchange. There was no unstable monetary unit of account. There was no unstable monetary store of value.

There was no double entry accounting model at that time. There were no historical cost items. There was no very destructive stable measuring unit assumption approved by the International Accounting Standards Board whereby accountants assume the unit of measure is stable, i.e., they consider that changes in the general purchasing power of money are not sufficiently important to require financial capital maintenance in units of constant purchasing power during low inflation and deflation. The stable measuring unit assumption is based on a very popular accounting fallacy since the real value of money is never absolutely stable on a sustainable basis during inflation and deflation. There was no Historical Cost Accounting model and no financial capital maintenance in nominal monetary units per se (another very popular IFRS-authorized accounting fallacy) during inflation; that is to say: there were no Historical Cost accounting fallacies. There was no value based accounting. There was also no Consumer Price Index at that time. Consequently there were no units of constant purchasing power and no price-level accounting.

Copyright © 2010 Nicolaas J Smith

Variable items

Variable items hold their values in terms of purchasing power as a result of the ways in which they are valued in terms of IFRS, SA GAAP or just simply in the market, in which their nominal values are adjusted to allow for the many factors that determine their values - including - amongst many factors - inflation. For example: fair value, market value, net realizable value, present value and recoverable value all adjust for inflation in the real value of the Rand as part of the specific valuation process.
Valuation values

Values used in the valuation of variable items on a primary valuation basis include the following:

Market value

Fair value

Net realisable value

Present value

Recoverable value

Current cost

Carrying value

Residual value

Value in use

Settlement value

Book value

Replacement cost

Historical cost

Copyright © 2010 Nicolaas J Smith

Variable items

Variable real value non-monetary items

Variable items are non-monetary items with variable real values over time.

Examples of variable items in today’s economy are property, plant, equipment, inventories, quoted and unquoted shares, raw material stock, finished goods stock, patents, trademarks, foreign exchange, etc: all economic items you see around you except monetary and constant items.

The first economic items were variable real value items. Their values were not yet expressed in terms of money because money was not yet invented at that time.

There was no inflation at that time because there was no money. There was no unstable monetary medium of exchange. There was no unstable monetary unit of account. There was no unstable monetary store of value.

There was no double entry accounting model at that time.

There were no historical cost items, no stable measuring unit assumption, no Historical Cost Accounting model and no financial capital maintenance in nominal monetary units; that is to say: there were no accounting fallacies.

There was no value based accounting.

There was also no Consumer Price Index at that time. Consequently there were no units of constant purchasing power and no price-level accounting.

There was no inflation accounting. There was no Constant Purchasing Power inflation accounting model under which all non-monetary items (variable and constant items) in Historical Cost and Current Cost financial statements are required to be restated by means of the year end CPI during hyperinflation.

There was also no continuous financial capital maintenance option under which only constant items are continuously measured in units of constant purchasing power by applying the monthly CPI during non-hyperinflationary periods in order to implement a continuous financial capital concept of invested purchasing power by continuously measuring financial capital maintenance in units of constant purchasing power and determining profit/loss in constant purchasing power units while variable items are continuously valued in terms of specific International Financial Reporting Standards or South African Generally Accepted Accounting Practice rules at, for example, market value, fair value, present value, recoverable value or net realizable value and monetary items are valued at their always current original nominal monetary values during the reporting period.

There were no financial reports: e.g. no income statements, no balance sheets, no cash flow statements, no statements of changes in Shareholders´ Equity, etc.

There were no monetary items and no constant items. There were only variable real value items not yet expressed in monetary terms.

Kindest regards,

Nicolaas Smith