Constant purchasing power accounting

Constant purchasing power accounting (CPPA) is an accounting model that is an alternative to model historical cost accounting under high inflation and hyper-inflationary environments. It has been approved for use by the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB). Under this IFRS and US GAAP authorized system, financial capital maintenance is always measured in units of constant purchasing power (CPP) in terms of a Daily CPI (consumer price index) during low inflation, high inflation, hyperinflation and deflation; i.e., during all possible economic environments. During all economic environments it can also be measured in a monetized daily indexed unit of account (e.g. the Unidad de Fomento in Chile) or in terms of a daily relatively stable foreign currency parallel rate, particularly during hyperinflation when a government refuses to publish CPI data. In the IASB's original Framework (1989), Par 104 (a), CPPA was authorized as an alternative to the traditional HCA model at all levels of inflation and deflation, including during hyperinflation as required in IAS 29. Income statement constant items like salaries, wages, rents, pensions, utilities, transport fees, etc. are normally valued in units of CPP during low inflation in most economies as an annual update. Payments in money for these items are normally inflation-adjusted by means of the consumer price index (CPI) to compensate for the erosion of the real value of money (the monetary medium of exchange) by inflation only on an annual not daily basis. "Inflation is always and everywhere a monetary phenomenon" and can only erode the real value of money (the functional currency inside an economy) and other monetary items. Inflation can not and does not erode the real value of non-monetary items. Inflation has no effect on the real value of non-monetary items. Accountants have to calculate the net monetary loss or gain from holding monetary items when they choose the CMUCPP model and measure financial CMUCPP in the same way as the IASB currently requires its calculation and accounting during hyperinflation.