IASB satisfied with IAS 29 having no
positive effect during hyperinflation
The
IASB is satisfied with the way IAS 29 was implemented during the last 8 years
of hyperinflation in Zimbabwe with no positive effect. Nothing needs to be done about
that matter according to the IASB. According to the IASB, actual financial
reporting (accounting) does not affect the economy! A senior IASB director indicated
this in a teleconference on 8 January 2013 in relation to measurement in units
of constant purchasing power in terms of an Unidade-Real-de-Valor-based
Daily Index as proposed under Capital Maintenance in Units of Constant
Purchasing Power as an IFRS-authorised alternative to IAS 29. According to the
IASB, it is what users do with financial reports that affects the economy.
The
above IASB indicated position regarding the fact that the Board is satisfied with
IAS 29 having no positive effect during hyperinflation is not a very good sign for the
research authorised by the IASB regarding the replacement of the failed IAS 29
standard. It thus appears that the IASB would prefer the Argentinean
Federation´s proposal to simply carry on with the failed IAS 29-style
restatement of period-end financial statements in terms of the measuring unit
current at the end of the reporting period – the monthly published CPI available by the earliest 7 days after the month-end - when actual
prices change daily – often
at a significant daily percentage - during hyperinflation. This was the failed IAS
29 model used during the last 8 years of hyperinflation in Zimbabwe with no
positive effect which the IASB is satisfied with. Hyperinflation ended in Zimbabwe in
2008.
An
amendment to the Argentinean Federation´s 2010 proposal as a replacement of the
failed IAS 29 was submitted to the IASB in January 2012. The amendment is based
on and changed the title of the Argentinean Accounting Federation´s proposed
new IFRS from IFRS ´X` INFLATION to IFRS ´X´ CAPITAL MAINTENANCE IN UNITS OF
CONSTANT PURCHASING POWER after it was pointed out to the IASB and the
Argentinean Accounting Federation that inflation has no effect on the real
value of non-monetary items. A copy of the amended IFRS `X´ CAPITAL MAINTENANCE
IN UNITS OF CONSTANT PURCHASING POWER is available here.
It
now seems that there is a very good chance that the failed fundamental IAS 29
restatement model – that had no positive effect during 8 years of implementation in
Zimbabwe´s hyperinflation – would be followed in the future replacement of IAS
29 instead of the real value maintaining IFRS-authorised – but little (not)
understood at the IASB - Capital Maintenance in Units of Constant Purchasing
Power model.
See:
Hyperinflationary
example comparing IAS 29 and Capital Maintenance in Units of Constant Purchasing
Power as presented to the IASB on 8 January 2013.
Nicolaas Smith
Copyright (c) 2005-2012 Nicolaas J Smith. All rights reserved. No reproduction without permission.
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