SA companies´ Issued Share Capital and Share Premium Account values stay the same and so do other reported constant real value non-monetary items in audited financial reports, for example reported Retained Earnings and Capital Reserves under the Historical Cost paradigm in SA´s low inflationary economy. This all helps to reinforce the illusion that the Rand maintains its real value over time which is not true. It is an illusion, namely money illusion.
The SA low inflationary economy is locked into the HC paradigm by a single wrong assumption: the stable measuring unit assumption whereby SA accountants assume that changes in the Rand´s real value are not of sufficient importance to justify financial capital maintenance in units of constant purchasing power. They only inflation-adjust some income statement items, e.g., salaries, wages, rents, regulated prices, etc. and generally implement financial capital maintenance in nominal monetary units; i.e. they implement the real value destroying HCA model which includes the very destructive stable measuring unit assumption during low inflation.
The combination of HCA and low inflation plus money illusion blinds us to the continuous destruction of existing real value in reported balance sheet constant items in companies by SA accountants implementing the stable measuring unit assumption in our low inflationary economy. It is true that everything is done in accordance with IFRS or SA GAAP because the ongoing destruction of existing real value in existing reported balance sheet constant items in companies is an integral part of the current global HCA model in countries with low inflationary economies.
This is a direct result of accountants´ stable measuring unit assumption as authorized in the Framework, Par. 104 (a) where under they choose to measure financial capital maintenance in nominal monetary units instead of in units of constant purchasing power – the other option in Par. 104 (a) also compliant with IFRS. When SA accountants choose to measure financial capital maintenance in units of constant purchasing power they would knowingly stop the destruction of existing real value in reported balance sheet constant items in SA companies forever – all else being equal. They would also stop the creation of more real value in reported balance sheet constant items not updated (decreased in nominal value) in companies in deflationary economies forever – all else being equal.
Kindest regards,
Nicolaas Smith
Wednesday, 25 November 2009
Tuesday, 24 November 2009
Trust me, I´m an accountant
Accountants unknowingly and unintentionally destroy at least R200 billion per annum in the real values of reported Retained Profits of most SA companies as well as in all SA companies that do not have 100% of Issued Share Capital and Share Premium Account values invested in revaluable fixed assets with their very destructive stable measuring unit assumption as part of the traditional Historical Cost Accounting model.
That is R200 billion per annum in Capital unknowingly destroyed by SA accountants assuming there is no such thing as inflation (value destruction) in the real value of the Rand when they value existing reported Retained Profits and other reported constant items never maintained during low inflation in nominal monetary units, i.e., at Historical Cost.
Inflation has no effect on reported Retained Profits, Issued Share Capital and Share Premium Account values which are all constant real value non-monetary items. Inflation can only destroy the real value of the Rand and other monetary items - nothing else. Inflation has on effect on the real value of non-monetary items.
SA accountants value the above items in nominal monetary units in terms of the SA Rand which is the monetary unit of account and functional currency in SA. They value them at their original Historical Costs over time in our low inflationary environment. These items´ nominal values thus stay the same because SA accountants simply assume there is no inflation in the Rand when they value them. They only make this assumption as far as balance sheet constant items and the majority of income statement items are concerned. Some income items they inflation-adjust, e.g. salaries, wages, rentals, etc.
SA accountants implement their infamous stable measuring unit assumption whereby they assume that changes in the purchasing power of the Rand is not sufficiently important to inflation-adjust these values. However, there is inflation in SA and their real values are thus being destroyed at a rate equal to the inflation rate because the Rand´s real value is, in fact, being destroyed by inflation.
SA accountants implement their very destructive stable measuring unit assumption because they refuse to measure them in units of constant purchasing power as they have been authorized to do 20 years ago by the IASB.
So, it is not inflation doing the destroying, but, SA accountants choosing the real value destroying Historical Cost Accounting model which includes the very destructive stable measuring unit assumption despite the fact that they have been authorized 20 years ago to stop this massive annual destruction by freely choosing to measure finacial capital maintenance in units of constant purchasing power - which they and all the boards of directors of alll JSE listed companies refuste to do.
Inflation can be whatever rate: 2% or 10% or 15% or 20% or 24% per annum - when SA accountants freely change over and choose to measure financial capital maintenance in units of constant purchasing power there will be no destruction at all in the real value of existing reported constant items.
So, it is very clear that it is not inflation doing the destroying, but, SA accountants unknowingly and unintentionally destroying about R200 billion per annum in existing reported constant items in SA companies simply because of the accounting model they choose; namely, the real value destroying traditional Historical Cost Accounting model which includes their very destructive stable measuring unit assumption.
The IASB authorized them 20 years ago to measure financial capital maintenance in units of constant purchasing power in the Framework, Par. 104 (a) which states:
"Financial capital maintenance can be measured in either nominal monetary units or in units of constant purchasing power."
SA accountants and the boards of directors of all JSE listed companies refuse point blank to measure financial capital maintenance in units of constant purchasing power.
So, trust me, I´m an accountant: I´m destroying your company´s reported Retained Profits at the rate of inflation.
© 2005-2010 by Nicolaas J Smith. All rights reserved
No reproduction without permission.
That is R200 billion per annum in Capital unknowingly destroyed by SA accountants assuming there is no such thing as inflation (value destruction) in the real value of the Rand when they value existing reported Retained Profits and other reported constant items never maintained during low inflation in nominal monetary units, i.e., at Historical Cost.
Inflation has no effect on reported Retained Profits, Issued Share Capital and Share Premium Account values which are all constant real value non-monetary items. Inflation can only destroy the real value of the Rand and other monetary items - nothing else. Inflation has on effect on the real value of non-monetary items.
SA accountants value the above items in nominal monetary units in terms of the SA Rand which is the monetary unit of account and functional currency in SA. They value them at their original Historical Costs over time in our low inflationary environment. These items´ nominal values thus stay the same because SA accountants simply assume there is no inflation in the Rand when they value them. They only make this assumption as far as balance sheet constant items and the majority of income statement items are concerned. Some income items they inflation-adjust, e.g. salaries, wages, rentals, etc.
SA accountants implement their infamous stable measuring unit assumption whereby they assume that changes in the purchasing power of the Rand is not sufficiently important to inflation-adjust these values. However, there is inflation in SA and their real values are thus being destroyed at a rate equal to the inflation rate because the Rand´s real value is, in fact, being destroyed by inflation.
SA accountants implement their very destructive stable measuring unit assumption because they refuse to measure them in units of constant purchasing power as they have been authorized to do 20 years ago by the IASB.
So, it is not inflation doing the destroying, but, SA accountants choosing the real value destroying Historical Cost Accounting model which includes the very destructive stable measuring unit assumption despite the fact that they have been authorized 20 years ago to stop this massive annual destruction by freely choosing to measure finacial capital maintenance in units of constant purchasing power - which they and all the boards of directors of alll JSE listed companies refuste to do.
Inflation can be whatever rate: 2% or 10% or 15% or 20% or 24% per annum - when SA accountants freely change over and choose to measure financial capital maintenance in units of constant purchasing power there will be no destruction at all in the real value of existing reported constant items.
So, it is very clear that it is not inflation doing the destroying, but, SA accountants unknowingly and unintentionally destroying about R200 billion per annum in existing reported constant items in SA companies simply because of the accounting model they choose; namely, the real value destroying traditional Historical Cost Accounting model which includes their very destructive stable measuring unit assumption.
The IASB authorized them 20 years ago to measure financial capital maintenance in units of constant purchasing power in the Framework, Par. 104 (a) which states:
"Financial capital maintenance can be measured in either nominal monetary units or in units of constant purchasing power."
SA accountants and the boards of directors of all JSE listed companies refuse point blank to measure financial capital maintenance in units of constant purchasing power.
So, trust me, I´m an accountant: I´m destroying your company´s reported Retained Profits at the rate of inflation.
© 2005-2010 by Nicolaas J Smith. All rights reserved
No reproduction without permission.
Monday, 23 November 2009
Inflation-adjusting constant items during low inflation does affect the economy positively
Ask anyone receiving a wage or a salary and he or she will confirm that inflation-adjusting salaries does make a difference to the economy. It does affect the nature of the underlying resource – salary, wage, rent, reported Retained Profits, dividends receivable, etc – when a constant item value is determined in terms of units of constant purchasing power instead of in nominal monetary units over time during low inflation.
The choices SA accountants make do change those values and do affect the SA economy. All SA accountants who are members of the boards of directors of SA companies listed on the JSE choose between financial capital maintenance in nominal monetary units and units of constant purchasing power in terms of the Framework, Par. 104 (a). JSE listed companies have to do their accounts in terms of IFRS. All SA accountants on their boards of directors thus have to make that choice since they are the accounting experts on those boards of directors and have to advise the boards accordingly. Valuing existing reported constant items in units of constant purchasing power during low inflation do change those values and do affect the SA economy.
The statement that the choices accountants make won’t change those values and won’t affect the economy is dead wrong.
© 2005-2010 by Nicolaas J Smith. All rights reserved
No reproduction without permission
The choices SA accountants make do change those values and do affect the SA economy. All SA accountants who are members of the boards of directors of SA companies listed on the JSE choose between financial capital maintenance in nominal monetary units and units of constant purchasing power in terms of the Framework, Par. 104 (a). JSE listed companies have to do their accounts in terms of IFRS. All SA accountants on their boards of directors thus have to make that choice since they are the accounting experts on those boards of directors and have to advise the boards accordingly. Valuing existing reported constant items in units of constant purchasing power during low inflation do change those values and do affect the SA economy.
The statement that the choices accountants make won’t change those values and won’t affect the economy is dead wrong.
© 2005-2010 by Nicolaas J Smith. All rights reserved
No reproduction without permission
SA accountants are suckers for the stable measuring unit assumption
SA accountants unknowingly destroy the real value of existing reported constant items never maintained during low inflation when they implement their very destructive stable measuring unit assumption as part of the real value destroying traditional Historical Cost Accounting model.
100% of the inflation-adjusted original real value of all contributions to Issued Share Capital and Share Premium Account values have to be invested in revaluable variable item fixed assets with an equivalent maintained fair value (revalued or with unrecorded hidden holding gains) during low inflation in order for SA accountants not to destroy these item’s original real values at a rate equal to the rate of inflation under the real value destroying traditional HCA model when they implement their very destructive stable measuring unit assumption.
Very few companies in SA abide by the 100% of Issued Share Capital and Share Premium invested in fixed assets rule.
There is no unnecessary real value destruction by SA accountants in Issued Share Capital and Share Premium Account values not backed by 100% investment in revaluable fixed assets when they measure financial capital maintenance in units of constant purchasing power as authorized by the IASB in the Framework, Par. 104 (a) in 1989: the constant real value of Issued Share Capital and Share Premium Account values would be maintained even with no fixed assets in SA companies - that always at least break even - when SA accountants measure financial capital maintenance in units of constant purchasing power; i.e. when they abandon their very destructive stable measuring unit assumption.
Kindest regards,
Nicolaas Smith
100% of the inflation-adjusted original real value of all contributions to Issued Share Capital and Share Premium Account values have to be invested in revaluable variable item fixed assets with an equivalent maintained fair value (revalued or with unrecorded hidden holding gains) during low inflation in order for SA accountants not to destroy these item’s original real values at a rate equal to the rate of inflation under the real value destroying traditional HCA model when they implement their very destructive stable measuring unit assumption.
Very few companies in SA abide by the 100% of Issued Share Capital and Share Premium invested in fixed assets rule.
There is no unnecessary real value destruction by SA accountants in Issued Share Capital and Share Premium Account values not backed by 100% investment in revaluable fixed assets when they measure financial capital maintenance in units of constant purchasing power as authorized by the IASB in the Framework, Par. 104 (a) in 1989: the constant real value of Issued Share Capital and Share Premium Account values would be maintained even with no fixed assets in SA companies - that always at least break even - when SA accountants measure financial capital maintenance in units of constant purchasing power; i.e. when they abandon their very destructive stable measuring unit assumption.
Kindest regards,
Nicolaas Smith
Friday, 20 November 2009
Constant items
The Framework, Par. 102 states that most companies choose a financial concept of capital to prepare their financial reports. An entity’s capital is the same as its equity or net assets when it adopts a financial concept of capital, for example invested purchasing power or invested money.
Par. 103 states that the needs of financial report users should determine the choice of the correct concept of capital by a company. If the users of financial reports are mainly concerned with the maintenance of nominal invested capital or the maintenance of the purchasing power of invested capital then a financial concept of capital should be chosen.
Par. 104 states that the concepts of capital stated in Par. 102 give origin to the financial capital maintenance concept. Par. 104 (a) then states that:
"Financial capital maintenance can be measured in either nominal monetary units or units of constant purchasing power."
The IASB clearly defines issued share capital, capital reserves, retained earnings, all other items in shareholders´ equity, all items in the income statement, provisions, etc as non-monetary items. Since these real value non-monetary items can be measured in units of constant purchasing power in terms of the Framework, Par. 104 (a), to implement a financial capital maintenance concept in units of constant purchasing power, they are obviously constant real value non-monetary items with constant real non-monetary values expressed in terms of a monetary unit of account over time in a low inflationary or deflationary economy.
Logic would thus imply and it is a fact that real value non-monetary items that are not measured in units of constant purchasing power during low inflation or deflation on a primary valuation basis but are valued in terms of specific IFRS at, for example, market value, fair value, recoverable value, net realisable value, present value, etc are not constant but variable real value non-monetary items, e.g. property, plant, equipment, shares, inventory, foreign exchange, etc.
Examples of constant items
All income statement items once they are accounted
Revenue
Cost of sales
Gross Profit
Investment revenues
Other gains and losses
Net monetary gains and losses
Share of profits of associates
Changes in inventories of finished goods and work in progress
Raw materials and consumables used
Depreciation and amortisation expense
Employee benefits expense
Distribution expenses
Marketing expenses
Occupancy expenses
Administration expenses
Finance costs
Consulting expense
Royalities
Other expenses
Profit before tax
Income tax expense
Profit for the year from continuing operations
Profit for the year from discontinued operations
Profit for the year
All balance sheet constant items
Deferred tax assets
Finance lease receivables
Trade and other non-monetary debtors
Provision for doubtful debts
Current tax assets
Issued share capital
Share premium
Share discount
Capital reserves
General reserve
Properties revaluation reserve
Investments revaluation reserve
Equity-settled employee benefits reserve
Hedging reserve
Foreign currency translation reserve
Retained earnings
Retirement benefit obligation
Deferred tax liabilities
Provisions
Employee benefits provision
Provision for rectification work
Provision for warranties
Onerous lease contract provision
Restructuring and termination costs provision
Decommissioning costs provision
Deferred Revenue
Trade and other non-monetary creditors
Current tax liabilities
The IASB only recognizes monetary and non-monetary items in the economy. The Board manages to side-step the split between variable and constant items with the stable measuring unit assumption which it accepts as part of HCA. Constant items are valued in nominal monetary units under HCA implementing the stable measuring unit assumption.
HCA makes no difference between variable real value non-monetary items and constant real value non-monetary items. Both variable and constant items are grouped together as simply non-monetary items as opposed to monetary items. Both variable items valued at HC (e.g. fixed property) and constant items valued at HC (Retained Earnings) are classified as simply non-monetary items under HCA.
Kindest regards,
Nicolaas Smit
Par. 103 states that the needs of financial report users should determine the choice of the correct concept of capital by a company. If the users of financial reports are mainly concerned with the maintenance of nominal invested capital or the maintenance of the purchasing power of invested capital then a financial concept of capital should be chosen.
Par. 104 states that the concepts of capital stated in Par. 102 give origin to the financial capital maintenance concept. Par. 104 (a) then states that:
"Financial capital maintenance can be measured in either nominal monetary units or units of constant purchasing power."
The IASB clearly defines issued share capital, capital reserves, retained earnings, all other items in shareholders´ equity, all items in the income statement, provisions, etc as non-monetary items. Since these real value non-monetary items can be measured in units of constant purchasing power in terms of the Framework, Par. 104 (a), to implement a financial capital maintenance concept in units of constant purchasing power, they are obviously constant real value non-monetary items with constant real non-monetary values expressed in terms of a monetary unit of account over time in a low inflationary or deflationary economy.
Logic would thus imply and it is a fact that real value non-monetary items that are not measured in units of constant purchasing power during low inflation or deflation on a primary valuation basis but are valued in terms of specific IFRS at, for example, market value, fair value, recoverable value, net realisable value, present value, etc are not constant but variable real value non-monetary items, e.g. property, plant, equipment, shares, inventory, foreign exchange, etc.
Examples of constant items
All income statement items once they are accounted
Revenue
Cost of sales
Gross Profit
Investment revenues
Other gains and losses
Net monetary gains and losses
Share of profits of associates
Changes in inventories of finished goods and work in progress
Raw materials and consumables used
Depreciation and amortisation expense
Employee benefits expense
Distribution expenses
Marketing expenses
Occupancy expenses
Administration expenses
Finance costs
Consulting expense
Royalities
Other expenses
Profit before tax
Income tax expense
Profit for the year from continuing operations
Profit for the year from discontinued operations
Profit for the year
All balance sheet constant items
Deferred tax assets
Finance lease receivables
Trade and other non-monetary debtors
Provision for doubtful debts
Current tax assets
Issued share capital
Share premium
Share discount
Capital reserves
General reserve
Properties revaluation reserve
Investments revaluation reserve
Equity-settled employee benefits reserve
Hedging reserve
Foreign currency translation reserve
Retained earnings
Retirement benefit obligation
Deferred tax liabilities
Provisions
Employee benefits provision
Provision for rectification work
Provision for warranties
Onerous lease contract provision
Restructuring and termination costs provision
Decommissioning costs provision
Deferred Revenue
Trade and other non-monetary creditors
Current tax liabilities
The IASB only recognizes monetary and non-monetary items in the economy. The Board manages to side-step the split between variable and constant items with the stable measuring unit assumption which it accepts as part of HCA. Constant items are valued in nominal monetary units under HCA implementing the stable measuring unit assumption.
HCA makes no difference between variable real value non-monetary items and constant real value non-monetary items. Both variable and constant items are grouped together as simply non-monetary items as opposed to monetary items. Both variable items valued at HC (e.g. fixed property) and constant items valued at HC (Retained Earnings) are classified as simply non-monetary items under HCA.
Kindest regards,
Nicolaas Smit
Thursday, 19 November 2009
Eskom price increase does not necessarily increase inflation
A price increase is paying more money for equivalent more real value.
Inflation is paying more money for the same real value.
In theory, an Eskom electricity price increase (25% or 45%) does not necessarily increase inflation. Everyone will just have less money for other things - all else being equal (the zero increase option).
That is theory.
All else do not stay equal.
Inflation comes about when unscrupulous business people abuse the electricity price increase for unjustified other price increases with no real value increase or no cost increase.
Is it unscrupulous or is it just the normal workings of the free market?
I think it is the normal workings of the free market. I will push my price up to see if I can make more profit. Imperfect market conditions may result in my inflationary actions not being corrected or counter-acted in the free market. They may flow through to the general price increase and may increase inflation: i.e., increase the destruction of the real value of the Rand and all other monetary items in the SA economy above the current 6.1% per annum real value destruction in the Rand.
Gill Marcus and her team at the SARB have to develop measures to combat my actions to simply look after my own self-interest.
Kindest regards,
Nicolaas Smith
Inflation is paying more money for the same real value.
In theory, an Eskom electricity price increase (25% or 45%) does not necessarily increase inflation. Everyone will just have less money for other things - all else being equal (the zero increase option).
That is theory.
All else do not stay equal.
Inflation comes about when unscrupulous business people abuse the electricity price increase for unjustified other price increases with no real value increase or no cost increase.
Is it unscrupulous or is it just the normal workings of the free market?
I think it is the normal workings of the free market. I will push my price up to see if I can make more profit. Imperfect market conditions may result in my inflationary actions not being corrected or counter-acted in the free market. They may flow through to the general price increase and may increase inflation: i.e., increase the destruction of the real value of the Rand and all other monetary items in the SA economy above the current 6.1% per annum real value destruction in the Rand.
Gill Marcus and her team at the SARB have to develop measures to combat my actions to simply look after my own self-interest.
Kindest regards,
Nicolaas Smith
IASB does not recognize constant items
Hi,
Non-monetary items are subdivided in
a) Variable real value non-monetary items and
b) Constant real value non-monetary items.
Constant items are non-monetary items with constant real values over time.
IAS 29 clearly defines non-monetary items as per the IASB.
Non-monetary items are all items that are not monetary items. This IASB definition is correct for non-monetary items as a generic term. It is however taken that there are thus only two distinct items in the economy: monetary and non-monetary items. The standard to be applied in hyperinflationary economies, IAS 29, was developed on this basis.
It is not true that there are only two basic economic items as defined by the IASB. There are three fundamentally different basic economic items in the economy:
1. Variable real value non-monetary items
2. Monetary items
3. Constant real value non-monetary items
The IASB does not recognize constant real value non-monetary items directly by name or by definition, but, indirectly by implication. The fact that certain non-monetary items have constant real non-monetary values is implied by the IASB in the Framework for the Preparation and Presentation of Financial Statements which is applicable in the absence of specific IFRS. There is no specific IFRS relating to the concepts of capital or the concepts of capital maintenance. The concepts of capital, the capital maintenance concepts and the measurement bases defined in the Framework are thus applicable.
Kindest regards,
Nicolaas Smith
Non-monetary items are subdivided in
a) Variable real value non-monetary items and
b) Constant real value non-monetary items.
Constant items are non-monetary items with constant real values over time.
IAS 29 clearly defines non-monetary items as per the IASB.
Non-monetary items are all items that are not monetary items. This IASB definition is correct for non-monetary items as a generic term. It is however taken that there are thus only two distinct items in the economy: monetary and non-monetary items. The standard to be applied in hyperinflationary economies, IAS 29, was developed on this basis.
It is not true that there are only two basic economic items as defined by the IASB. There are three fundamentally different basic economic items in the economy:
1. Variable real value non-monetary items
2. Monetary items
3. Constant real value non-monetary items
The IASB does not recognize constant real value non-monetary items directly by name or by definition, but, indirectly by implication. The fact that certain non-monetary items have constant real non-monetary values is implied by the IASB in the Framework for the Preparation and Presentation of Financial Statements which is applicable in the absence of specific IFRS. There is no specific IFRS relating to the concepts of capital or the concepts of capital maintenance. The concepts of capital, the capital maintenance concepts and the measurement bases defined in the Framework are thus applicable.
Kindest regards,
Nicolaas Smith
Wednesday, 18 November 2009
Dollar not money in SA
A foreign currency is not the functional currency in South Africa since it is not the generally accepted national unit of account. The Rand is the unit of account in SA. The SA economy is not a Dollarized economy. The Rand is the functional currency.
Money has three functions:
1. Medium of exchange
2. Store of value
3. Unit of account
A foreign currency like the US Dollar or the Euro is, however, a medium of exchange in SA. Most businesses and individuals would accept the USD or the Euro as a means of payment; that is, as a medium of exchange because they can easily sell the foreign currency amounts they would receive in transactions at their local banks for Rands.
A hard currency is also a store of value in SA. The USD and the Euro are hard currencies with daily changing market values. They are generally accepted world wide as a relatively stable store of value. People know there are normal daily small changes in their exchange values.
The USD and the Euro are, however, not national units of account in SA. You cannot do your SA accounts in US Dollars or Euros for tax purposes. You have to do your accounting in Rand values in the SA economy. They are not functional currencies in SA since they do not fulfil all three functions of a functional currency within the SA economy. A foreign currency like the USD or the Euro only fulfils two functions of money, namely, medium of exchange and store of value. They therefore are not "money" in SA from a strictly technical point of view. They are not monetary items subject in SA.
Foreign currencies are variable real value non-monetary items in the SA economy. They have variable real non-monetary values which are determined in the foreign exchange markets in SA.
The US Dollar is only a functional currency outside the United States of America in countries like Ecuador, Panama and Zimbabwe that have Dollarized their economies. They use the US Dollar as their functional currency. They do not have their own national currencies. That is not the case in SA.
It just appears very strange to say that the US Dollar or the Euro is not "money" in SA. Technically speaking that is correct because an economic item can only be money if it fulfils all three functions of money. The Euro is only money in the European Monetary Union (EMU) and the USD is only money in the US and in countries that have Dollarized their economies.
The man and woman in the street, however, regard anything that is a medium of exchange as “money” in very limited applications. Cigarettes are often used as a medium of exchange in prisons. Shells have been used way back in history as a medium of exchange.
The man and woman in the street in SA certainly regard the USD and the Euro as money in SA. Accountants would, however, classify foreign exchange as a variable real value non-monetary item stated at its market value at the balance sheet date and not the same as the SA Rand, that is, not as a monetary item when they choose to implement financial capital maintenance in units of constant purchasing power in terms of the Framework, Par. 104 (a).
Kindest regards,
Nicolaas Smith
Money has three functions:
1. Medium of exchange
2. Store of value
3. Unit of account
A foreign currency like the US Dollar or the Euro is, however, a medium of exchange in SA. Most businesses and individuals would accept the USD or the Euro as a means of payment; that is, as a medium of exchange because they can easily sell the foreign currency amounts they would receive in transactions at their local banks for Rands.
A hard currency is also a store of value in SA. The USD and the Euro are hard currencies with daily changing market values. They are generally accepted world wide as a relatively stable store of value. People know there are normal daily small changes in their exchange values.
The USD and the Euro are, however, not national units of account in SA. You cannot do your SA accounts in US Dollars or Euros for tax purposes. You have to do your accounting in Rand values in the SA economy. They are not functional currencies in SA since they do not fulfil all three functions of a functional currency within the SA economy. A foreign currency like the USD or the Euro only fulfils two functions of money, namely, medium of exchange and store of value. They therefore are not "money" in SA from a strictly technical point of view. They are not monetary items subject in SA.
Foreign currencies are variable real value non-monetary items in the SA economy. They have variable real non-monetary values which are determined in the foreign exchange markets in SA.
The US Dollar is only a functional currency outside the United States of America in countries like Ecuador, Panama and Zimbabwe that have Dollarized their economies. They use the US Dollar as their functional currency. They do not have their own national currencies. That is not the case in SA.
It just appears very strange to say that the US Dollar or the Euro is not "money" in SA. Technically speaking that is correct because an economic item can only be money if it fulfils all three functions of money. The Euro is only money in the European Monetary Union (EMU) and the USD is only money in the US and in countries that have Dollarized their economies.
The man and woman in the street, however, regard anything that is a medium of exchange as “money” in very limited applications. Cigarettes are often used as a medium of exchange in prisons. Shells have been used way back in history as a medium of exchange.
The man and woman in the street in SA certainly regard the USD and the Euro as money in SA. Accountants would, however, classify foreign exchange as a variable real value non-monetary item stated at its market value at the balance sheet date and not the same as the SA Rand, that is, not as a monetary item when they choose to implement financial capital maintenance in units of constant purchasing power in terms of the Framework, Par. 104 (a).
Kindest regards,
Nicolaas Smith
Monday, 16 November 2009
Inflation has no effect on the real value on non-monetary items
A house is a variable real value non-monetary item. Let us assume a house in Port Elizabeth is fairly valued in the PE market at say R 2 million on 1st January in year one. With no change in the market a year later but with inflation at 6% in SA, the seller would increase his or her price to R2.12 million - all else being equal. The house’s real value remained the same. The depreciating monetary price for the house expressed in the depreciating Rand medium of exchange – all else being equal - was inflation-adjusted to compensate for the destruction of the real value of the depreciating Rand in the internal SA market by 6% annual inflation. It is clear that inflation does not affect the house’s variable non-monetary real value – all else being equal.
However much inflation rises, it can only make the Rand more worthless at a higher rate and over a shorter period of time. Heaven forbid that what happened in Zimbabwe recently would ever happen in SA. As inflation rises the price of the house would rise to keep pace with inflation or value destruction in the real value of the Rand – all else being equal. The real value of the property will be updated as long as the house is valued as a variable real value non-monetary item at its market price, a measurement base dictated by IFRS and also practiced in all open markets.
When a property was valued at Historical Cost in the not so distant past in a company’s balance sheet it may have stayed at its original HC of, for example, R 100 000 for 28 years since January, 1981 in the company’s balance sheet. When it is eventually sold today for R 1.4 million we can see that inflation did not destroy the property’s variable real non-monetary value – all else being equal. Inflation only destroyed the real value of the depreciating Rand, the depreciating monetary medium of exchange, over the 28 year period - all else being equal. This was taken into account by the buyer and seller at the time of the sale. The selling price in Rand was increased to compensate for the destruction of the real value of the Rand by inflation. R1.4 million today (2009) is the same as R100 000 in January, 1981 – all else being equal.
As the two lady academics from Turkey state: Purchasing power of non monetary items does not change in spite of variation in national currency value.
Kindest regards,
Nicolaas Smith
However much inflation rises, it can only make the Rand more worthless at a higher rate and over a shorter period of time. Heaven forbid that what happened in Zimbabwe recently would ever happen in SA. As inflation rises the price of the house would rise to keep pace with inflation or value destruction in the real value of the Rand – all else being equal. The real value of the property will be updated as long as the house is valued as a variable real value non-monetary item at its market price, a measurement base dictated by IFRS and also practiced in all open markets.
When a property was valued at Historical Cost in the not so distant past in a company’s balance sheet it may have stayed at its original HC of, for example, R 100 000 for 28 years since January, 1981 in the company’s balance sheet. When it is eventually sold today for R 1.4 million we can see that inflation did not destroy the property’s variable real non-monetary value – all else being equal. Inflation only destroyed the real value of the depreciating Rand, the depreciating monetary medium of exchange, over the 28 year period - all else being equal. This was taken into account by the buyer and seller at the time of the sale. The selling price in Rand was increased to compensate for the destruction of the real value of the Rand by inflation. R1.4 million today (2009) is the same as R100 000 in January, 1981 – all else being equal.
As the two lady academics from Turkey state: Purchasing power of non monetary items does not change in spite of variation in national currency value.
Kindest regards,
Nicolaas Smith
Friday, 13 November 2009
First Zimbabwe. Now Venezuela. Next Malema and South Africa?
Hi,
Chavez´s nationalization continues.
26% annual inflation for 3 years in a row is hyperinflation.
Venezuela is already at 27% annual inflation.
Zimbabwe can guarantee Venezuela that price controls do not work.
As soon as price controls enter, production drops.
Robert Mugabe tried what no-one has ever done: beat the market.
Now Hugo Chavez is trying the same impossible dream: to beat the market.
He will also fail as Mugabe failed.
The market rules.
After Zimbabwe we can now watch Venezuela self-destruct.
I hope the ANC, Julius Malema, the ANCYL, Cosatu, Numsa and the SA Communist Party take careful note how this process unfolds because it always works exactly the same way. Go and look up the exact same process in Zimbabwe a year or two ago.
I see Venezuela already had 39% inflation at the end of last year. And a parallel USDollar exchange rate considerably higher than the "official" rate. And a local petrol price not increased for 10 years.
lol Exactly the same as hyperinflation in Angola and Zimbabwe.
Malema should take a sebatical year from politics in SA and go and learn again from Chavez how the above measures destroy a country´s economy in few short years.
I watched this exact same process unfold on a daily basis in Zimbabwe over the last two years. Venezuela is exactly the same. The same measures by government and the same characteristics in the economy.
Julius Malema can get first hand experience from Chavez how to destroy a country through trying unsuccessfully to surpress the market.
It is time to start reading a Venezuelan English online newspaper on a daily basis. Zimbabwe all over again. What a joke. Very interesting completely up to date daily economics though.
Kindest regards,
Nicolaas Smith
Chavez´s nationalization continues.
26% annual inflation for 3 years in a row is hyperinflation.
Venezuela is already at 27% annual inflation.
Zimbabwe can guarantee Venezuela that price controls do not work.
As soon as price controls enter, production drops.
Robert Mugabe tried what no-one has ever done: beat the market.
Now Hugo Chavez is trying the same impossible dream: to beat the market.
He will also fail as Mugabe failed.
The market rules.
After Zimbabwe we can now watch Venezuela self-destruct.
I hope the ANC, Julius Malema, the ANCYL, Cosatu, Numsa and the SA Communist Party take careful note how this process unfolds because it always works exactly the same way. Go and look up the exact same process in Zimbabwe a year or two ago.
I see Venezuela already had 39% inflation at the end of last year. And a parallel USDollar exchange rate considerably higher than the "official" rate. And a local petrol price not increased for 10 years.
lol Exactly the same as hyperinflation in Angola and Zimbabwe.
Malema should take a sebatical year from politics in SA and go and learn again from Chavez how the above measures destroy a country´s economy in few short years.
I watched this exact same process unfold on a daily basis in Zimbabwe over the last two years. Venezuela is exactly the same. The same measures by government and the same characteristics in the economy.
Julius Malema can get first hand experience from Chavez how to destroy a country through trying unsuccessfully to surpress the market.
It is time to start reading a Venezuelan English online newspaper on a daily basis. Zimbabwe all over again. What a joke. Very interesting completely up to date daily economics though.
Kindest regards,
Nicolaas Smith
Thursday, 12 November 2009
Valuing fixed properties at HC before they are sold does not destroy their real values
The real values of fixed properties are not destroyed by SA accountants when they value these fixed assets at their original nominal HC values before the date that they are actually exchanged during low inflation. They would be valued at their current market values on the date of exchange in an open economy. During hyperinflation all variable items are required to be valued in units of constant purchasing power with reference to the CPI or a hard currency parallel rate – normally the US Dollar parallel rate.
This is not the case with reported constant items never maintained under the HC paradigm. Accountants unknowingly destroy the real values of reported constant items never maintained at a rate equal to the rate of inflation in a low inflationary environment with their stable measuring unit assumption under HCA.
Variable items´ real values are not being unknowingly destroyed by SA accountants as a result of their implementation of IFRS or SA GAAP since variable items exist independently of how we value them. They can value a variable item in the balance sheet at its HC 50 years ago, but, when it is sold in the market today, the variable item would be transacted at the current market price. The real values of variable items are also not being destroyed uniformly at, e.g., a rate equal to the inflation rate because of valuing them at original nominal HC. Inflation, per se, has no effect on the real values of variable items on a primary valuation basis.
Where real losses are made in dealing with variable items in SA, these losses are the result of supply and demand or business and private decisions, e.g. selling at a bad price, obsolescence, stock market crashes, credit crunches, etc. They do not result from the implementation by SA accountants of the HC accounting model.
Kindest regards,
Nicolaas Smith
This is not the case with reported constant items never maintained under the HC paradigm. Accountants unknowingly destroy the real values of reported constant items never maintained at a rate equal to the rate of inflation in a low inflationary environment with their stable measuring unit assumption under HCA.
Variable items´ real values are not being unknowingly destroyed by SA accountants as a result of their implementation of IFRS or SA GAAP since variable items exist independently of how we value them. They can value a variable item in the balance sheet at its HC 50 years ago, but, when it is sold in the market today, the variable item would be transacted at the current market price. The real values of variable items are also not being destroyed uniformly at, e.g., a rate equal to the inflation rate because of valuing them at original nominal HC. Inflation, per se, has no effect on the real values of variable items on a primary valuation basis.
Where real losses are made in dealing with variable items in SA, these losses are the result of supply and demand or business and private decisions, e.g. selling at a bad price, obsolescence, stock market crashes, credit crunches, etc. They do not result from the implementation by SA accountants of the HC accounting model.
Kindest regards,
Nicolaas Smith
Tuesday, 10 November 2009
The Historical Cost Debate
Originally – before there were any GAAPs and IFRSs – all variable items as well as all constant items together with all monetary items (basically all items in financial statements) were valued at Historical Cost since money – the monetary unit of account –was generally assumed to be stable in real value over time: the infamous stable measuring unit assumption. Today, SA accountants maintain this infamous and very destructive and very economically destabilizing assumption only for the valuation of the majority of income statement items (excluding salaries, wages, rents, etc that accountants value in units of constant purchasing power) and all balance sheet constant items during low inflation and deflation.
Values used in relation to variable items include the following:
Market value
Fair value
Net realisable value
Present value
Recoverable value
Current cost
Carrying value
Residual value
“The residual value of an asset is the estimated amount that an entity would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life.”
Value in use
Settlement value
Book value
Replacement cost
Historical cost
The Historical Cost Debate
The Historical Cost Debate is the debate over the last 100 years or so about the exclusive use of Historical Cost for all accounting purposes. The accounting profession has realized for a very long time that financial reports based on Historical Cost for all economic items do not fairly represent a company’s results and operations. As a result of this debate the pure Historical Cost Accounting model has been improved dramatically during this time, so much so, that today we have a huge volume of IFRS where under variable items are not all valued at HC but at the values as indicated above. As a result of the Historical Cost Debate variable items are today valued at, e.g. fair value or the lower of cost and net realizable value or market value or recoverable value or present value. This debate has thus been a very valid and successful debate regarding the valuation of variable real value non-monetary items.
Unfortunately, the stable measuring unit assumption is still an IFRS compliant option that everyone uses for the valuation of most constant items during low inflation and deflation. Fortunately, the option of measuring financial capital maintenance in units of constant purchasing power during low inflation has been approved by the IASB in the Framework, Par. 104 (a) in 1989. Unfortunately, no-one uses it.
SA accountants value variable items in terms of IFRSs or SA GAAP when they implement both the traditional HCA model and whenever they decide to choose to measure financial capital maintenance in units of constant purchasing power. Inflation, per se, has no effect on the real values of variable items. Inflation – per se – can only destroy the real value of money and other monetary items: nothing else.
Kindest regards,
Nicolaas Smith
Values used in relation to variable items include the following:
Market value
Fair value
Net realisable value
Present value
Recoverable value
Current cost
Carrying value
Residual value
“The residual value of an asset is the estimated amount that an entity would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life.”
Value in use
Settlement value
Book value
Replacement cost
Historical cost
The Historical Cost Debate
The Historical Cost Debate is the debate over the last 100 years or so about the exclusive use of Historical Cost for all accounting purposes. The accounting profession has realized for a very long time that financial reports based on Historical Cost for all economic items do not fairly represent a company’s results and operations. As a result of this debate the pure Historical Cost Accounting model has been improved dramatically during this time, so much so, that today we have a huge volume of IFRS where under variable items are not all valued at HC but at the values as indicated above. As a result of the Historical Cost Debate variable items are today valued at, e.g. fair value or the lower of cost and net realizable value or market value or recoverable value or present value. This debate has thus been a very valid and successful debate regarding the valuation of variable real value non-monetary items.
Unfortunately, the stable measuring unit assumption is still an IFRS compliant option that everyone uses for the valuation of most constant items during low inflation and deflation. Fortunately, the option of measuring financial capital maintenance in units of constant purchasing power during low inflation has been approved by the IASB in the Framework, Par. 104 (a) in 1989. Unfortunately, no-one uses it.
SA accountants value variable items in terms of IFRSs or SA GAAP when they implement both the traditional HCA model and whenever they decide to choose to measure financial capital maintenance in units of constant purchasing power. Inflation, per se, has no effect on the real values of variable items. Inflation – per se – can only destroy the real value of money and other monetary items: nothing else.
Kindest regards,
Nicolaas Smith
Monday, 9 November 2009
Variable items exist independently of how accountants value them
As we know, the economy consists of three basic economic items:
1.Monetary items
2.Variable real value non-monetary items
3.Constant real value non-monetary items
Monetary items are money held and items with an underlying monetary nature. Non-monetary items are all items that are not monetary items. Non-monetary items are further sub-divided into variable and constant items.
Variable items are non-monetary items with variable real values
valued in terms of IFRS or GAAP.
The first economic items were variable items not yet expressed in terms of money since money was not yet invented at that time. Once money was invented all economic items, including variable items, were expressed in monetary terms.
Examples of variable items and how they are valued
Property – at cost or fair value
Freehold Land – at cost or fair value
Buildings – at cost or fair value
Leasehold Improvements – at cost
Plant – at cost
Equipment – at cost
Equipment under Finance Lease – at cost
Investment Property – at fair value
Goodwill – at cost
Other Intangible Assets – at cost
Capitalised Development Items – at cost
Patents – at cost
Trademarks – at cost
Licences – at cost
Investments in Associates – at cost
Joint Ventures – at cost
Other Financial Assets – at fair value
Derivatives designated and effective as hedging instruments – at fair value
Foreign currency forward contracts – at fair value
Interest rate swaps – at fair value
Financial assets carried at fair value through profit or loss
Non-derivative financial assets designated as carried at fair value through profit or loss
Held for trading derivatives that are not designated in hedge accounting relationships – at fair value
Held for trading non-derivative financial assets – at fair value
Available-for-sale investments carried at fair value
Redeemable notes – at fair value
Shares – at fair value
Inventories – at the lower of cost and net realisable value
Raw Materials – at the lower of cost and net realisable value
Work-in-progress – at the lower of cost and net realisable value
Finished Goods – at the lower of cost and net realisable value
Foreign currency – at market value
Variable items in South Africa are valued, for example, at fair value or the lower of cost and net realizable value or recoverable value or market value or present value in terms of IFRS or SA GAAP. “Listed companies use IFRS and the unlisted companies could use either IFRS or Statements of GAAP.”
SA financial reports fairly represent the fundamental real values of variable items in terms of IFRS or SA GAAP only at the balance sheet date – excluding those valued at original nominal Historical Cost when that original date is not the balance sheet date on a primary valuation basis. The fundamental real values of variable items exist independently of being valued at their original nominal HC after the original date they came about or were acquired by the firm. Valuing a variable item at its original nominal HC during its lifetime does not destroy its real value because it will be valued at its current market value whenever it is finally exchanged or sold or disposed of in the future.
© 2005-2010 by Nicolaas J Smith. All rights reserved
No reproduction without permission.
1.Monetary items
2.Variable real value non-monetary items
3.Constant real value non-monetary items
Monetary items are money held and items with an underlying monetary nature. Non-monetary items are all items that are not monetary items. Non-monetary items are further sub-divided into variable and constant items.
Variable items are non-monetary items with variable real values
valued in terms of IFRS or GAAP.
The first economic items were variable items not yet expressed in terms of money since money was not yet invented at that time. Once money was invented all economic items, including variable items, were expressed in monetary terms.
Examples of variable items and how they are valued
Property – at cost or fair value
Freehold Land – at cost or fair value
Buildings – at cost or fair value
Leasehold Improvements – at cost
Plant – at cost
Equipment – at cost
Equipment under Finance Lease – at cost
Investment Property – at fair value
Goodwill – at cost
Other Intangible Assets – at cost
Capitalised Development Items – at cost
Patents – at cost
Trademarks – at cost
Licences – at cost
Investments in Associates – at cost
Joint Ventures – at cost
Other Financial Assets – at fair value
Derivatives designated and effective as hedging instruments – at fair value
Foreign currency forward contracts – at fair value
Interest rate swaps – at fair value
Financial assets carried at fair value through profit or loss
Non-derivative financial assets designated as carried at fair value through profit or loss
Held for trading derivatives that are not designated in hedge accounting relationships – at fair value
Held for trading non-derivative financial assets – at fair value
Available-for-sale investments carried at fair value
Redeemable notes – at fair value
Shares – at fair value
Inventories – at the lower of cost and net realisable value
Raw Materials – at the lower of cost and net realisable value
Work-in-progress – at the lower of cost and net realisable value
Finished Goods – at the lower of cost and net realisable value
Foreign currency – at market value
Variable items in South Africa are valued, for example, at fair value or the lower of cost and net realizable value or recoverable value or market value or present value in terms of IFRS or SA GAAP. “Listed companies use IFRS and the unlisted companies could use either IFRS or Statements of GAAP.”
SA financial reports fairly represent the fundamental real values of variable items in terms of IFRS or SA GAAP only at the balance sheet date – excluding those valued at original nominal Historical Cost when that original date is not the balance sheet date on a primary valuation basis. The fundamental real values of variable items exist independently of being valued at their original nominal HC after the original date they came about or were acquired by the firm. Valuing a variable item at its original nominal HC during its lifetime does not destroy its real value because it will be valued at its current market value whenever it is finally exchanged or sold or disposed of in the future.
© 2005-2010 by Nicolaas J Smith. All rights reserved
No reproduction without permission.
Wednesday, 4 November 2009
Measurement of the Elements of Financial Statements
Here is a verbatim copy of some paragraphs of the International Accounting Standard Board´s
Framework for the Preparation and Presentation of Financial Statements (1989)
Measurement of the Elements of Financial Statements
Par. 99. Measurement is the process of determining the monetary amounts at which the elements of the financial statements are to be recognised and carried in the balance sheet and income statement. This involves the selection of the particular basis of measurement.
Par. 100. A number of different measurement bases are employed to different degrees and in varying combinations in financial statements. They include the following:
(a) Historical cost. Assets are recorded at the amount of cash or cash equivalents paid or the fair value of the consideration given to acquire them at the time of their acquisition. Liabilities are recorded at the amount of proceeds received in exchange for the obligation, or in some circumstances (for example, income taxes), at the amounts of cash or cash equivalents expected to be paid to satisfy the liability in the normal course of business.
(b) Current cost. Assets are carried at the amount of cash or cash equivalents that would have to be paid if the same or an equivalent asset was acquired currently. Liabilities are carried at the undiscounted amount of cash or cash equivalents that would be required to settle the obligation currently.
(c) Realisable (settlement) value. Assets are carried at the amount of cash or cash equivalents that could currently be obtained by selling the asset in an orderly disposal. Liabilities are carried at their settlement values; that is, the undiscounted amounts of cash or cash equivalents expected to be paid to satisfy the liabilities in the normal course of business.
(d) Present value. Assets are carried at the present discounted value of the future net cash inflows that the item is expected to generate in the normal course of business. Liabilities are carried at the present discounted value of the future net cash outflows that are expected to be required to settle the liabilities in the normal course of business.
Par. 101. The measurement basis most commonly adopted by entities in preparing their financial statements is historical cost. This is usually combined with other measurement bases. For example, inventories are usually carried at the lower of cost and net realisable value, marketable securities may be carried at market value and pension liabilities are carried at their present value. Furthermore, some entities use the current cost basis as a response to the inability of the historical cost accounting model to deal with the effects of changing prices of non-monetary assets.
The above sections of the Framework do not include measurement in units of constant purchasing power. This comes next in the concept of capital and the concept of capital maintenance in the Framework. It is an actual measurement basis. It is the measurement basis currently used by all accountants worldwide - including SA accountants - to value salaries, wages, rentals, regulated prices, etc in units of constant purchasing power during low inflation. It is thus universally used for the valuation of only some income statement constant real value non-monetary items during low inflation.
It is required to be used for all non-monetary items - variable and constant real value non-monetary items - during hyperinflation. This is a requirement of IAS 29 Financial Reporting in Hyperinflationary Economies.
It is also required by the IASB to be used for the valuation of all income statement and balance sheet constant items during low inflation when accountants choose financial capital maintenance in units of constant purchasing power in terms of the Framework, Par. 104 (a) during low inflation.
Measurement in units of constant purchasing power is thus completely generally accepted as a distinct and well understood and universally used measurement basis during low inflation. It is a generally accepted accounting principle (GAAP) during low, high and hyperinflation.
See the IASB deliberations regarding MEASUREMENT as of October 2014
Buy the ebook
Nicolaas Smith Copyright (c) 2005-2014 Nicolaas J Smith. All rights reserved. No reproduction without permission.
Framework for the Preparation and Presentation of Financial Statements (1989)
Measurement of the Elements of Financial Statements
Par. 99. Measurement is the process of determining the monetary amounts at which the elements of the financial statements are to be recognised and carried in the balance sheet and income statement. This involves the selection of the particular basis of measurement.
Par. 100. A number of different measurement bases are employed to different degrees and in varying combinations in financial statements. They include the following:
(a) Historical cost. Assets are recorded at the amount of cash or cash equivalents paid or the fair value of the consideration given to acquire them at the time of their acquisition. Liabilities are recorded at the amount of proceeds received in exchange for the obligation, or in some circumstances (for example, income taxes), at the amounts of cash or cash equivalents expected to be paid to satisfy the liability in the normal course of business.
(b) Current cost. Assets are carried at the amount of cash or cash equivalents that would have to be paid if the same or an equivalent asset was acquired currently. Liabilities are carried at the undiscounted amount of cash or cash equivalents that would be required to settle the obligation currently.
(c) Realisable (settlement) value. Assets are carried at the amount of cash or cash equivalents that could currently be obtained by selling the asset in an orderly disposal. Liabilities are carried at their settlement values; that is, the undiscounted amounts of cash or cash equivalents expected to be paid to satisfy the liabilities in the normal course of business.
(d) Present value. Assets are carried at the present discounted value of the future net cash inflows that the item is expected to generate in the normal course of business. Liabilities are carried at the present discounted value of the future net cash outflows that are expected to be required to settle the liabilities in the normal course of business.
Par. 101. The measurement basis most commonly adopted by entities in preparing their financial statements is historical cost. This is usually combined with other measurement bases. For example, inventories are usually carried at the lower of cost and net realisable value, marketable securities may be carried at market value and pension liabilities are carried at their present value. Furthermore, some entities use the current cost basis as a response to the inability of the historical cost accounting model to deal with the effects of changing prices of non-monetary assets.
The above sections of the Framework do not include measurement in units of constant purchasing power. This comes next in the concept of capital and the concept of capital maintenance in the Framework. It is an actual measurement basis. It is the measurement basis currently used by all accountants worldwide - including SA accountants - to value salaries, wages, rentals, regulated prices, etc in units of constant purchasing power during low inflation. It is thus universally used for the valuation of only some income statement constant real value non-monetary items during low inflation.
It is required to be used for all non-monetary items - variable and constant real value non-monetary items - during hyperinflation. This is a requirement of IAS 29 Financial Reporting in Hyperinflationary Economies.
It is also required by the IASB to be used for the valuation of all income statement and balance sheet constant items during low inflation when accountants choose financial capital maintenance in units of constant purchasing power in terms of the Framework, Par. 104 (a) during low inflation.
Measurement in units of constant purchasing power is thus completely generally accepted as a distinct and well understood and universally used measurement basis during low inflation. It is a generally accepted accounting principle (GAAP) during low, high and hyperinflation.
See the IASB deliberations regarding MEASUREMENT as of October 2014
Buy the ebook
Nicolaas Smith Copyright (c) 2005-2014 Nicolaas J Smith. All rights reserved. No reproduction without permission.
Tuesday, 3 November 2009
The net monetary gain or loss conundrum
SA accountants have to calculate the net monetary loss or gain from holding monetary items when they choose the Constant ITEM Purchasing Power Accounting model in terms of the International Accounting Standards Board´s Framework, Par. 104 (a) and measure financial capital maintenance in units of constant purchasing power in the same way as the IASB currently in terms of IAS 29 requires its calculation and accounting during hyperinflation.
There are net monetary losses and net monetary gains during low inflation too, but they are not required to be calculated when accountants choose the traditional Historical Cost Accounting model.
It is an inexplicable contradiction that net monetary gains and losses are required by the IASB to be calculated and accounted during hyperinflation but not during non-hyperinflationary periods, especially when the IASB approved alternative to HCA, namely CIPPA does require their calculation and accounting during low inflation.
Kindest regards,
Nicolaas Smith
There are net monetary losses and net monetary gains during low inflation too, but they are not required to be calculated when accountants choose the traditional Historical Cost Accounting model.
It is an inexplicable contradiction that net monetary gains and losses are required by the IASB to be calculated and accounted during hyperinflation but not during non-hyperinflationary periods, especially when the IASB approved alternative to HCA, namely CIPPA does require their calculation and accounting during low inflation.
Kindest regards,
Nicolaas Smith
Monday, 2 November 2009
Ultimately, inflation-adjusting accounts in a low inflation environment is a blessing to users.
The statement "Financial capital maintenance can be measured in either nominal monetary units or units of constant purchasing power," in the IASB´s Framework, Paragraph 104 (a), means that Constant ITEM Purchasing Power Accounting has been authorized by the IASB since 1989 as an alternative to the traditional HCA model, including during periods of low inflation.
This means that the international accounting profession has been in agreement regarding the use of CIPPA for financial capital maintenance in units of CPP during low inflation since 1989. It also means that CIPPA and the inflation-adjustment of constant items to maintain their real values in a low inflationary environment are authorized by IFRS since the Framework is applicable in the absence of specific IFRS.
Income statement constant items like salaries, wages, rents, pensions, utilities, transport fees, etc are normally valued by accountants in units of CPP during low inflation in most economies. Payments in money for these items are normally inflation-adjusted by means of the CPI to compensate for the destruction of the real value of money (the monetary medium of exchange) by inflation.
Inflation is always and everywhere a monetary phenomenon and can only destroy the real value of money (the functional currency inside an economy) and other monetary items. Inflation can not and does not destroy the real value of non-monetary items. Constant items´ real values can be maintained by accountants choosing the CIPPA model as per the Framework during low inflation as authorized by the IASB since 1989 instead of currently being destroyed by the implementation by accountants of the traditional HC model when they apply the stable measuring unit assumption.
It is thus accountants´ choice of the HCA model and not inflation that destroys the real value of constant items never maintained at a rate equal to the inflation rate when HC accountants choose to implement the stable measuring unit assumption for an indefinite period of time during continuous inflation.
Implementing the CIPPA model means accountants choose to reject the stable measuring unit assumption which they implement when they choose to measure financial capital maintenance in nominal monetary units. Accountants world wide currently choose the traditional HCA model except during hyperinflation when they are required by the IASB to implement IAS 29 which is based on the CPPA inflation accounting model.
Kindest regards,
Nicolaas Smith
This means that the international accounting profession has been in agreement regarding the use of CIPPA for financial capital maintenance in units of CPP during low inflation since 1989. It also means that CIPPA and the inflation-adjustment of constant items to maintain their real values in a low inflationary environment are authorized by IFRS since the Framework is applicable in the absence of specific IFRS.
Income statement constant items like salaries, wages, rents, pensions, utilities, transport fees, etc are normally valued by accountants in units of CPP during low inflation in most economies. Payments in money for these items are normally inflation-adjusted by means of the CPI to compensate for the destruction of the real value of money (the monetary medium of exchange) by inflation.
Inflation is always and everywhere a monetary phenomenon and can only destroy the real value of money (the functional currency inside an economy) and other monetary items. Inflation can not and does not destroy the real value of non-monetary items. Constant items´ real values can be maintained by accountants choosing the CIPPA model as per the Framework during low inflation as authorized by the IASB since 1989 instead of currently being destroyed by the implementation by accountants of the traditional HC model when they apply the stable measuring unit assumption.
It is thus accountants´ choice of the HCA model and not inflation that destroys the real value of constant items never maintained at a rate equal to the inflation rate when HC accountants choose to implement the stable measuring unit assumption for an indefinite period of time during continuous inflation.
Implementing the CIPPA model means accountants choose to reject the stable measuring unit assumption which they implement when they choose to measure financial capital maintenance in nominal monetary units. Accountants world wide currently choose the traditional HCA model except during hyperinflation when they are required by the IASB to implement IAS 29 which is based on the CPPA inflation accounting model.
Kindest regards,
Nicolaas Smith
Friday, 30 October 2009
Hyperinflation in South Africa
IFRS compliant financial capital maintenance in units of constant purchasing power would always be a better accounting model than HCA during inflation.
SA accountants unknowingly destroy the real value of reported Retained Earnings at the rate of inflation under HCA implementing the stable measuring unit assumption in the SA real economy.
Rejecting the stable measuring unit assumption by measuring financial capital maintenance in units of constant purchasing power as authorized by the IASB in the Framework, Par. 104 (a) in 1989 would stop this destruction of real value in Retained Earnings.
It would remove distortions in the real economy, improve economic stability and guarantee that no wipe-out of internal demand would be possible in the SA economy like what happened in the recent past in the Zimbabwean economy under very high rates of inflation.
Hyperinflation is still possible in SA in the Rand, but, with no stable measuring unit assumption and all constant items (including salaries, wages, rentals, shareholders´ equity, trade debtors, trade creditors, taxes payable, taxes receivable, etc) being automatically updated in units of constant purchasing power, economic stability in the real economy would be guaranteed as it was in Brazil during 30 years of hyperinflation of up to 2000% per annum.
Brazil used indexation to maintain the real values of non-monetary items during the 30 years of hyperinflation in their internal currencies during that period.
Financial capital maintenance in units of constant purchasing power in terms of the Framework, Par. 104 (a), is the same as indexation, but, only in constant items - not in variable real value non-monetary items. The latter are valued in terms of IFRS or SA GAAP.
Retained Earnings can be updated under IFRS but not under HCA.
Kindest regards,
Nicolaas Smith
SA accountants unknowingly destroy the real value of reported Retained Earnings at the rate of inflation under HCA implementing the stable measuring unit assumption in the SA real economy.
Rejecting the stable measuring unit assumption by measuring financial capital maintenance in units of constant purchasing power as authorized by the IASB in the Framework, Par. 104 (a) in 1989 would stop this destruction of real value in Retained Earnings.
It would remove distortions in the real economy, improve economic stability and guarantee that no wipe-out of internal demand would be possible in the SA economy like what happened in the recent past in the Zimbabwean economy under very high rates of inflation.
Hyperinflation is still possible in SA in the Rand, but, with no stable measuring unit assumption and all constant items (including salaries, wages, rentals, shareholders´ equity, trade debtors, trade creditors, taxes payable, taxes receivable, etc) being automatically updated in units of constant purchasing power, economic stability in the real economy would be guaranteed as it was in Brazil during 30 years of hyperinflation of up to 2000% per annum.
Brazil used indexation to maintain the real values of non-monetary items during the 30 years of hyperinflation in their internal currencies during that period.
Financial capital maintenance in units of constant purchasing power in terms of the Framework, Par. 104 (a), is the same as indexation, but, only in constant items - not in variable real value non-monetary items. The latter are valued in terms of IFRS or SA GAAP.
Retained Earnings can be updated under IFRS but not under HCA.
Kindest regards,
Nicolaas Smith
How to maintain your capital
The specific choice of measuring financial capital maintenance in units of constant purchasing power (the Constant Item Purchasing Power Accounting model) during non-hyperinflationary periods as contained in the Framework, Par. 104 (a) , was approved by the IASB’s predecessor body, the International Accounting Standards Committee Board, in April 1989 for publication in July 1989 and adopted by the IASB in April 2001.
Deloitte
“In the absence of a Standard or an Interpretation that specifically applies to a transaction, management must use its judgement in developing and applying an accounting policy that results in information that is relevant and reliable. In making that judgement, IAS 8.11 requires management to consider the definitions, recognition criteria, and measurement concepts for assets, liabilities, income, and expenses in the Framework. This elevation of the importance of the Framework was added in the 2003 revisions to IAS 8."
IAS8, 11:
“In making the judgement, management shall refer to, and consider the applicability of, the following sources in descending order:
(a) the requirements and guidance in Standards and Interpretations dealing with similar and related issues; and
(b) the definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses in the Framework.”
There is no applicable IFRS or Interpretation regarding the capital concept, the capital maintenance concept and the valuation of constant items. The Framework is thus applicable.
Despite being applicable as a result of the absence of specific IFRS CIPPA is completely ignored by accountants and accounting authorities even though they would maintain the real value of constant items with it instead of currently unknowingly destroying the real values of not only all income statement constant items but also all balance sheet constant items never maintained when they implement the traditional HCA model.
This is because the CIPPA model is mistakenly viewed by almost all accountants and accounting authorities, but excluding the IASB, as the same as the 1970-style failed CPPA inflation accounting model that requires all non-monetary items - variable and constant items - to be inflation-adjusted by means of the CPI. They - including the IASB - fail to introduce the substantial real value maintaining benefits, which last for an unlimited period of time (all else being equal), of measuring financial capital maintenance in units of CPP in companies and the economy in general.
The IASB did not approve CIPPA in 1989 as an inflation accounting model. It did that with CPPA in IAS29. CIPPA by measuring financial capital maintenance in units of CPP incorporates an alternative CPP capital concept, CPP financial capital maintenance concept and CPP profit determination concept to the HC capital concept, HC financial capital maintenance concept and HC profit determination concept. CIPPA only requires all constant items to be valued in units of CPP. Variable items are valued in terms of IFRS or GAAP and are not required in terms of the Framework to be valued in units of CPP.
© 2005-2010 by Nicolaas J Smith. All rights reserved
No reproduction without permission.
Deloitte
“In the absence of a Standard or an Interpretation that specifically applies to a transaction, management must use its judgement in developing and applying an accounting policy that results in information that is relevant and reliable. In making that judgement, IAS 8.11 requires management to consider the definitions, recognition criteria, and measurement concepts for assets, liabilities, income, and expenses in the Framework. This elevation of the importance of the Framework was added in the 2003 revisions to IAS 8."
IAS8, 11:
“In making the judgement, management shall refer to, and consider the applicability of, the following sources in descending order:
(a) the requirements and guidance in Standards and Interpretations dealing with similar and related issues; and
(b) the definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses in the Framework.”
There is no applicable IFRS or Interpretation regarding the capital concept, the capital maintenance concept and the valuation of constant items. The Framework is thus applicable.
Despite being applicable as a result of the absence of specific IFRS CIPPA is completely ignored by accountants and accounting authorities even though they would maintain the real value of constant items with it instead of currently unknowingly destroying the real values of not only all income statement constant items but also all balance sheet constant items never maintained when they implement the traditional HCA model.
This is because the CIPPA model is mistakenly viewed by almost all accountants and accounting authorities, but excluding the IASB, as the same as the 1970-style failed CPPA inflation accounting model that requires all non-monetary items - variable and constant items - to be inflation-adjusted by means of the CPI. They - including the IASB - fail to introduce the substantial real value maintaining benefits, which last for an unlimited period of time (all else being equal), of measuring financial capital maintenance in units of CPP in companies and the economy in general.
The IASB did not approve CIPPA in 1989 as an inflation accounting model. It did that with CPPA in IAS29. CIPPA by measuring financial capital maintenance in units of CPP incorporates an alternative CPP capital concept, CPP financial capital maintenance concept and CPP profit determination concept to the HC capital concept, HC financial capital maintenance concept and HC profit determination concept. CIPPA only requires all constant items to be valued in units of CPP. Variable items are valued in terms of IFRS or GAAP and are not required in terms of the Framework to be valued in units of CPP.
© 2005-2010 by Nicolaas J Smith. All rights reserved
No reproduction without permission.
Wednesday, 28 October 2009
Trust me, I´m an accountant
SA accountants unknowingly destroy the real value of your company’s equity since they assume there´s no inflation.
They unknowingly destroy the real value of Retained Profits with their stable measuring unit assumption, but, they also do not update the cost of inventories and cost of sales.
Consequently they overstate gross margins and instead of maintaining the full real value of equity, they pay some of it away in tax on inflation-adjustments, they fail to update trade debtors and they can also pay it away in dividends.
Kindest regards,
Nicolaas Smith
They unknowingly destroy the real value of Retained Profits with their stable measuring unit assumption, but, they also do not update the cost of inventories and cost of sales.
Consequently they overstate gross margins and instead of maintaining the full real value of equity, they pay some of it away in tax on inflation-adjustments, they fail to update trade debtors and they can also pay it away in dividends.
Kindest regards,
Nicolaas Smith
Monday, 26 October 2009
The IASB´s alternative to Historical Cost Accounting
The IASB´s alternative to Historical Cost Accounting
Buy the ebook
Last updated on 17 April, 2012
Constant Purchasing Power Accounting (CPPA) as defined in International Accounting Standard IAS 29 Financial Reporting in Hyperinflationary Economies is the International Accounting Standards Board´s inflation accounting model required to be implemented only during hyperinflation.
Constant ITEM Purchasing Power Accounting (CIPPA) is the IASB´s basic accounting alternative to traditional Historical Cost Accounting during low and high inflation and deflation. The stable measuring unit assumption is implemented under HCA. The stable measuring unit assumption is never implemented as a GAAP under CIPPA. HCA implements financial capital maintenance in nominal monetary units. CIPPA implements financial capital maintenance in units of constant purchasing power in terms of a daily index. CIPPA is fundamentally different from HCA. Financial capital maintenance in nominal monetary units is a fallacy because if is impossible to maintain the constant purchasing power (real value) of capital constant in nominal monetary units per se during inflation and deflation. CIPPA, on the other hand, automatically maintains the constant purchasing power of capital constant for an indefinite period of time in all entities that at least break even in real value at all levels of inflation and deflation - ceteris paribus.
Both CPPA and CIPPA are price-level accounting models. IAS 29 simply requires the restatement of all non-monetary items (both variable and constant real value non-monetary items) in Historical Cost or Current Cost period-end financial statements in terms of the period-end monthly published Consumer Price Index during hyperinflation. IAS 29 is an extension to, not a departure from HCA per PricewaterhouseCoopers. IAS 29 had no effect during hyperinflation in Zimbabwe.
CIPPA as approved by the IASB in the original Framework for the Preparation and Presentation of Financial Statements (1989), Par. 104 (a) which states
'Financial capital maintenance can be measured in either nominal monetary units or units of constant purchasing power'
requires the following:
(1) Daily inflation-adjustement of all historic and current period monetary items in terms of a Daily CPI or monetized daily indexed unit of account. The net monetary loss or gain is calculated and accounted when monetary items are not inflation-adjusted daily during the current accounting periõd. The net monetary loss or gain is a constant real value non-monetary item once accounted in the income statement.
(2) Daily valuation of variable real value non-monetary items in terms of IFRS excluding the stable measuring unit assumption. Historical variable items (e.g., valued yesterday) are updated daily in terms of the Daily CPI or monetized daily indexed unit of account when they are not valued daily in terms of IFRS during low and high inflation and deflation. Impairments are treated in terms of IFRS.
(3) Historic and current period constant items are always and everywhere measured in units of constant purchasing power in terms of the Daily CPI or monetized daily indexed unit of account during low and high inflation and deflation. The net constant item loss or gain is calculated and accounted when current period constant items are not measured daily in units of constant purchasing power.
In terms of the Framework, accountants can choose CIPPA to implement a financial capital concept of invested purchasing power instead of the traditional HC concept of invested money. They will thus implement a CPP financial capital maintenance concept by measuring financial capital maintenance in units of CPP instead of traditional HC nominal monetary units and they will implement a CPP profit/loss determination concept. Examples of constant items include issued share capital, retained income, shareholders´ equity, trade debtors, trade creditors, deferred tax assets and liabilities, salaries, wages, rentals, etc. Examples of variable item include property, plant, equipment, shares, inventory.
Monetary, variable and constant items are the three fundamentally different basic economic items in the economy.
CIPPA would maintain the real value of constant items including banks´ and companies´ capital base, for an unlimited period of time - all else being equal, as opposed to the traditional HCA model which unknowingly, unintentionally and unnecessarily erode the real value of constant items never maintained constant. CIPPA was authorized by the IASB in 1989 as an alternative to the traditional HCA model at all levels of inflation and deflation in the Framework and is applicable as a result of the absence of specific IFRS relating to the concepts of capital and capital maintenance and the valuation of constant items.
CIPPA (not CPPA) during hyperinflation would be the same as in non-hyperinflationary economies. The only difference is that the daily rate would be a relatively stable foreign currency daily parallel rate (normally the US Dollar daily parallel rate) or a Brazilian-style Unidade Real de Valor daily index rate. All non-monetary items (variable and constant items) would be measured in units of constant purchasing power on a daily basis as indicated above during hyperinflation.
Discredited 1970-style CPPA was a form of inflation accounting which tried unsuccessfully - by updating all non-monetary items (variable and constant items) equally by means of the CPI during high inflation - to allow for the effect of the stable measuring unit assumption in an attempt to make corporate accounts more informative when comparing current transactions with previous transactions.
Nevertheless, almost all accountants and accounting authorities - excluding the IASB - mistakenly regard CIPPA as the same as the discredited and failed 1970-style CPPA inflation accounting model. They ignore the CIPPA model's substantial benefits, for example, automatically maintaining banks´ and companies´ capital base when accountants choose to measure constant items in units of constant purchasing power by means of the Daily CPI thus maintaining instead of continuously eroding their real values at a rate equal to the rate of inflation while they value variable items daily in terms of IFRS or GAAP excluding the stable measuring unit assumption.
Certain income statement constant items, most notably salaries, wages and rentals, etc. are measured in units of constant purchasing power on an annual basis, but are paid in fixed monthly amounts again implementing the stable measuring unit assumption in most economies implementing the HCA model.
The IASB specifically requires the CPPA inflation accounting model to be used during hyperinflation as per IAS 29.
Buy the ebook for $2.99 or £1.53 or €2.68
Nicolaas Smith
Copyright (c) 2005-2012 Nicolaas J Smith. All rights reserved. No reproduction without permission.
Buy the ebook
Last updated on 17 April, 2012
Constant Purchasing Power Accounting (CPPA) as defined in International Accounting Standard IAS 29 Financial Reporting in Hyperinflationary Economies is the International Accounting Standards Board´s inflation accounting model required to be implemented only during hyperinflation.
Constant ITEM Purchasing Power Accounting (CIPPA) is the IASB´s basic accounting alternative to traditional Historical Cost Accounting during low and high inflation and deflation. The stable measuring unit assumption is implemented under HCA. The stable measuring unit assumption is never implemented as a GAAP under CIPPA. HCA implements financial capital maintenance in nominal monetary units. CIPPA implements financial capital maintenance in units of constant purchasing power in terms of a daily index. CIPPA is fundamentally different from HCA. Financial capital maintenance in nominal monetary units is a fallacy because if is impossible to maintain the constant purchasing power (real value) of capital constant in nominal monetary units per se during inflation and deflation. CIPPA, on the other hand, automatically maintains the constant purchasing power of capital constant for an indefinite period of time in all entities that at least break even in real value at all levels of inflation and deflation - ceteris paribus.
Both CPPA and CIPPA are price-level accounting models. IAS 29 simply requires the restatement of all non-monetary items (both variable and constant real value non-monetary items) in Historical Cost or Current Cost period-end financial statements in terms of the period-end monthly published Consumer Price Index during hyperinflation. IAS 29 is an extension to, not a departure from HCA per PricewaterhouseCoopers. IAS 29 had no effect during hyperinflation in Zimbabwe.
CIPPA as approved by the IASB in the original Framework for the Preparation and Presentation of Financial Statements (1989), Par. 104 (a) which states
'Financial capital maintenance can be measured in either nominal monetary units or units of constant purchasing power'
requires the following:
(1) Daily inflation-adjustement of all historic and current period monetary items in terms of a Daily CPI or monetized daily indexed unit of account. The net monetary loss or gain is calculated and accounted when monetary items are not inflation-adjusted daily during the current accounting periõd. The net monetary loss or gain is a constant real value non-monetary item once accounted in the income statement.
(2) Daily valuation of variable real value non-monetary items in terms of IFRS excluding the stable measuring unit assumption. Historical variable items (e.g., valued yesterday) are updated daily in terms of the Daily CPI or monetized daily indexed unit of account when they are not valued daily in terms of IFRS during low and high inflation and deflation. Impairments are treated in terms of IFRS.
(3) Historic and current period constant items are always and everywhere measured in units of constant purchasing power in terms of the Daily CPI or monetized daily indexed unit of account during low and high inflation and deflation. The net constant item loss or gain is calculated and accounted when current period constant items are not measured daily in units of constant purchasing power.
In terms of the Framework, accountants can choose CIPPA to implement a financial capital concept of invested purchasing power instead of the traditional HC concept of invested money. They will thus implement a CPP financial capital maintenance concept by measuring financial capital maintenance in units of CPP instead of traditional HC nominal monetary units and they will implement a CPP profit/loss determination concept. Examples of constant items include issued share capital, retained income, shareholders´ equity, trade debtors, trade creditors, deferred tax assets and liabilities, salaries, wages, rentals, etc. Examples of variable item include property, plant, equipment, shares, inventory.
Monetary, variable and constant items are the three fundamentally different basic economic items in the economy.
CIPPA would maintain the real value of constant items including banks´ and companies´ capital base, for an unlimited period of time - all else being equal, as opposed to the traditional HCA model which unknowingly, unintentionally and unnecessarily erode the real value of constant items never maintained constant. CIPPA was authorized by the IASB in 1989 as an alternative to the traditional HCA model at all levels of inflation and deflation in the Framework and is applicable as a result of the absence of specific IFRS relating to the concepts of capital and capital maintenance and the valuation of constant items.
CIPPA (not CPPA) during hyperinflation would be the same as in non-hyperinflationary economies. The only difference is that the daily rate would be a relatively stable foreign currency daily parallel rate (normally the US Dollar daily parallel rate) or a Brazilian-style Unidade Real de Valor daily index rate. All non-monetary items (variable and constant items) would be measured in units of constant purchasing power on a daily basis as indicated above during hyperinflation.
Discredited 1970-style CPPA was a form of inflation accounting which tried unsuccessfully - by updating all non-monetary items (variable and constant items) equally by means of the CPI during high inflation - to allow for the effect of the stable measuring unit assumption in an attempt to make corporate accounts more informative when comparing current transactions with previous transactions.
Nevertheless, almost all accountants and accounting authorities - excluding the IASB - mistakenly regard CIPPA as the same as the discredited and failed 1970-style CPPA inflation accounting model. They ignore the CIPPA model's substantial benefits, for example, automatically maintaining banks´ and companies´ capital base when accountants choose to measure constant items in units of constant purchasing power by means of the Daily CPI thus maintaining instead of continuously eroding their real values at a rate equal to the rate of inflation while they value variable items daily in terms of IFRS or GAAP excluding the stable measuring unit assumption.
Certain income statement constant items, most notably salaries, wages and rentals, etc. are measured in units of constant purchasing power on an annual basis, but are paid in fixed monthly amounts again implementing the stable measuring unit assumption in most economies implementing the HCA model.
The IASB specifically requires the CPPA inflation accounting model to be used during hyperinflation as per IAS 29.
Buy the ebook for $2.99 or £1.53 or €2.68
Nicolaas Smith
Copyright (c) 2005-2012 Nicolaas J Smith. All rights reserved. No reproduction without permission.
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