Editing Historical cost (section)

==IASB approved alternative to historical cost accounting==

The IASB's Framework introduced [[Constant purchasing power accounting|Capital Maintenance in Units of Constant Purchasing Power]] as an alternative to Historical Cost Accounting in 1989 in Par. 104 (a) where it states that financial capital maintenance can be measured in either nominal monetary units - the traditional HCA model - or in units of constant purchasing power at all levels of inflation and deflation: the CMUCPP model.<ref>IASB Framework, Par. 104 (a): "Financial capital maintenance can be measured in either nominal monetary units or in units of constant purchasing power."</ref>

The specific choice of measuring financial capital maintenance in units of constant purchasing power (the CMUCPP model) at all levels of inflation and deflation as contained in the Framework for the Preparation and Presentation of Financial Statements, was approved by the International Accounting Standards Board'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.

<blockquote>"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."</blockquote>
<ref>[http://www.iasplus.com/standard/framewk.htm IAS Plus, Deloitte]</ref>

IAS8, 11: <blockquote>"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."</blockquote>

There is no applicable International Financial Reporting Standard or Interpretation regarding the valuation of constant real value non-monetary items, e.g. issued share capital, retained earnings, capital reserves, all other items in Shareholders Equity, trade debtors, trade creditors, deferred tax assets and liabilities, taxes payable and receivable, all other non-monetary receivables and payables, Profit and Loss account items such as salaries, wages, rents, etc. The Framework is thus applicable.

The CMUCPP model is chosen by hardly any accountant in non-hyperinflationary economies even though it would automatically maintain the real value of constant real value non-monetary items, e.g. issued share capital, retained income, other shareholder equity items, trade debtors, trade creditors, etc., constant for an unlimited period of time in all entities that at least in real value at all levels of inflation and deflation - all else being equal. This is because the CMUCPP model is generally viewed by accountants as a 1970s failed [[inflation accounting]] model that requires all non-monetary items - variable real value non-monetary items and constant real value non-monetary items - to be inflation-adjusted by means of the [[Consumer Price Index]].

The IASB did not approve CMUCPP in 1989 as an [[inflation accounting]] model. CMUCPP by measuring financial capital maintenance in units of constant purchasing power incorporates an alternative capital concept, financial capital maintenance concept and profit determination concept to the Historical Cost capital concept, financial capital maintenance concept and profit determination concept. CMUCPP requires all constant real value non-monetary items, e.g. issued share capital, retained income, all other items in Shareholders Equity, trade debtors, trade creditors, deferred tax assets and liabilities, taxes payable and receivable, all items in the profit and loss account, etc. to be valued in units of constant purchasing power on a daily basis. Variable real value non-monetary items, e.g. property, plant, equipment, listed and unlisted shares, inventory, etc. are valued in terms of IFRS and updated daily.

The IASB requires entities to implement IAS 29 which is a [[Constant purchasing power accounting|Capital Maintenance in Units of Constant Purchasing Power]] model during hyperinflation.