Australia

The Australian Accounting Standards Board (AASB) has issued 'Australian equivalents to IFRS' (A-IFRS), numbering IFRS standards as AASB 18 and IAS standards as AASB 101141. The AASB continues to mirror changes made by the IASB as local pronouncements. In addition, over recent years, the AASB has issued so-called 'Amending Standards' to reverse some of the initial changes made to the IFRS text for local terminology differences, to reinstate options and eliminate some Australian-specific disclosure.

Constant item purchasing power accounting (CIPPA) is the IASB's basic accounting alternative authorized in IFRS in 1989 as an alternative to traditional historical cost accounting whereunder only constant real value non-monetary items (not variable real value non-monetary items) are measured in units of constant purchasing power (inflation-adjusted) during lowinflation and deflation. Both CPPA and CIPPA are price-level accounting models which use the principle of financial capital maintenance in units of constant purchasing power. CPPA uses it to maintain the real value of all non-monetary items during hyperinflation. Under CIPPA only constant real value nonmonetary items (not variable real value non-monetary items) are measured in units of constant purchasing power during low inflation and deflation respectively. IAS 29 (CPPA) requires the updating of all non-monetary items (both variable and constant real value nonmonetary items) by means of the Consumer Price Index during hyperinflation. CIPPA as authorized in IFRS in the IASBs Framework for the Preparation and Presentation of Financial Statements, Par. 104 (a)[3] [4] in 1989 requires the inflation-adjustment (measurement in units of constant purchasing power) of only constant real value nonmonetary items by means of the CPI during non-hyperinflationary periods. In terms of the Framework, Par 104 (a) accountants can choose CIPPA to implement a financial capital concept of investedpurchasing power, i.e. financial capital maintenance in units of constant purchasing power during low inflation and deflation instead of the traditional HC concept of invested money. They will thus implement a Constant Purchasing Power financialcapital maintenance concept by measuring financial capital maintenance in units of Constant Purchasig Power instead of the traditional HC nominal monetary units and they will

implement a Constant Purchasing Power profit/loss determination concept in units of constant purchasing power instead of in real value destroying nominal monetary units during low inflation. CIPPA simply means inflation-adjusting only constant real value nonmonetary items, e.g., issued share capital, retained income, capital reserves, all other items in shareholders equity, trade debtors, trade creditors, provisions, deferred tax assets and liabilities, all other non-monetary payable, all other non-monetary receivables, salaries, wages, rentals, all other items in the income statement, etc, by means of the consumer price index (CPI) while valuing variable real value non-monetary items, e.g., property, plant, equipment, listed and unlisted shares, inventory, foreign exchange, etc., in terms ofInternational Financial Reporting Standards (IFRS) at for example fair value, market value, recoverable value, present value, net realizable value, etc. or Generally Accepted Accounting Principles (GAAP) during non-hyperinflationary periods. Monetary items are always valued at their original nominal HC monetary values in nominal monetary units during the current accounting period under all accounting and economic models because it is impossible to inflation adjust money and other monetary items, monetary items being money held and other items with an underlying monetary nature. Monetary items, variable real value non-monetary items and constant real value nonmonetary items are the three fundamentally different basic economic items in the economy.

Advantages and disadvantages of historical cost accounting

Advantages
  

Historical cost accounts are straightforward to produce Historical cost accounts do not record gains until they are realized Historical cost accounts are still used in most accounting systems

Disadvantages


Historical cost accounts give no indication of current values of the assets of a business

Historical cost accounts do not record the opportunity costs of the use of older assets, particularly property which may be recorded at a value based on costs incurred many years ago Historical cost accounts do not measure the loss of value of monetary assets as a result of inflation.[13] [14][15]

n accounting, historical cost is the original monetary value of an economic item.[1] Historical cost is based on the stable measuring unit assumption. In some circumstances, assets and liabilities may be shown at their historical cost, as if there had been no change in value since the date of acquisition. The balance sheet value of the item may therefore differ from the "true" value. While historical cost is criticised for its inaccuracy (deviation from "true" value), it remains in use in most accounting systems. Various corrections to historical cost are used, many of which require the use of management judgment and may be difficult to implement or verify. The trend in most accounting standards is a move to more accurate reflection of the fair or market value, although the historical cost principle remains in use, particularly for assets of little importance. Depreciation affects the carrying value of an asset on the balance sheet. The historical cost will equal the carrying value if there has been no change recorded in the value of the asset since acquisition. Improvements may be added to the cost basis of an asset. Historical cost does not generally reflect current market valuation. Alternative measurement bases to the historical cost measurement basis, which may be applied for some types of assets for which market values are readily available, require that the carrying value of an asset (or liability) be updated to the market price (mark-to-market valuation) or some other estimate of value that better approximates the real value. Accounting standards may also have different methods required or allowed (even for different types of balance sheet variable real value non-monetary assets or liabilities) as to how the resultant change in value of an asset or liability is recorded, as a part of income or as a direct change to shareholders'equity.

The Constant Item Purchasing Power Accounting model is an International Accounting Standards Board approved alternative basic accounting model to the traditional Historical Cost Accounting model.