06-21-2007, 09:24 AM
Retained income is a constant real value non-monetary item valued at Historical Cost which makes it subject to the destruction of its real value by cash inflation â exactly the same as in cash. It is forbidden to update Retained Income´s nominal value under the rules of the Historical Cost Accounting model in low inflation economies.
This is the immensely destructive result in the world economy of the implementation of the stable measuring unit assumption.
Accountants in all low inflation economies assume that money is stable in real value, but, only for the purpose of valuing constant real value non-monetary items; that is, changes in the money´s general purchasing power are not considered sufficiently important to require adjustments to the nominal values of constant real value non-monetary items in the basic financial statements.
Hundreds of billions of US Dollars in Retained Income real value have been destroyed every single year in the past and are this year being destroyed in the world economy.
Companies are free to revoke this very destructive stable measuring unit assumption which you accountants now only apply in the valuation of constant real value non-monetary items.
Adopting the Real Value Accounting model will allow companies to maintain billions of US Dollars in Retained Income real value in the world economy for an unlimited period of time - all else except inflation being equal.
This will have an important and sustained impact on economic growth in the world economy for an unlimited period of time - all else except inflation being equal.
At the moment you accountants are destroying hundreds of billions of US Dollars in retained income real value year in and year out. It is a fact. No-one can deny it.
If you are an accountant and your company has retained income in its balance sheet then you are desroying the real value of that retained income at the rate of inflation. You are free to revoke the stable measuring unit assumption. You will gain your company the average retained income balance per annum times the average annual inflation rate in real value for an unlimited period of time - all else except inflation being equal.
You are free to implement Real Value Accounting instead of Historical Cost Accounting. International Accounting Standards do not prescribe which basic accounting model has to be used. It simply notes that Historical Cost Accounting is the most widely used by companies.