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RealValueAccounting.Com
06-05-2007, 07:24 AM
Post: #1
RealValueAccounting.Com
RealValueAccounting.Com - The Next Step in Our Fundamental Model of Accounting

04-06-2007 407 Downloads

A free download of the book is available at the Social Science Research Network at http://http//ssrn.com/abstract=946775

Abstract

Historical Cost Accounting is the global generally accepted basic accounting model. The International Accounting Standards Board recognizes only two instead of three economic items

1. Monetary items (monetary items and certain non-monetary items classified as monetary items – in terms of the IASB definition of monetary items).

2. Non-monetary items variable real value non-monetary items valued, for example, at fair value, market value, present value, net realizable value, recoverable value - and Historical Cost items based on the stable measuring unit assumption which makes these Historical Cost items equal to (1) monetary items.

The split between variable and constant real value non-monetary items is thus ignored by the IASB as a result of the implementation of the stable measuring unit assumption - the cornerstone of the Historical Cost Accounting model - whereby it is accepted in low cash inflationary economies that the functional currency's internal real value is constantly being destroyed by cash inflation - but, this destruction of real value is regarded as of not sufficient importance to adjust the real values of constant real value non-monetary items in the financial statements.

They are valued at Historical Cost which results in their destruction at the rate of inflation/hyperinflation year after year when they are not updated at all or not fully updated. This destruction commenced in about the year 1300 when the double entry accounting model was introduced.

Real Value Accounting

Three economic items

I. Monetary items (only money held and accounted monetary values pertaining only to money)

II. Variable real value non-monetary items (the same as under Historical Cost Accounting excluding the stable measuring unit assumption).

III. Constant real value non-monetary items (The Third Economic Item) constantly having been and being destroyed at the rate of inflation and hyperinflation when they are not updated at all or not fully updated in all entities with double entry accounting.

Real Value Accounting stops this destruction.

Real Value Accounting identifies inflation's second consequence, namely, its non-monetary consequence called Historical Cost Accounting inflation.

The stable measuring unit assumption is revoked under Real Value Accounting.

A free download of the book is available at the Social Science Research Network at http://http//ssrn.com/abstract=946775

Nicolaas Smith
realvalueaccounting@yahoo.com
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