Financial capital maintenance
Financial capital can be expressed in nominal monetary units or units of constant purchasing power. Changes in asset and liability prices may be treated as returns on financial capital depending on the selected measurement and capital-maintenance concept. This is a conceptual framework concept; it does not override a specific IFRS Accounting Standard or mean every price change is distributable cash.
Worked example
An entity begins with net assets of $100,000 and ends with $130,000 after receiving a $10,000 owner contribution. On a nominal financial-capital basis, the increase excluding owner transactions is $20,000, assuming no other owner movements.
Common mistake
Counting new share capital as profit or equating financial capital maintenance with maintaining physical productive capacity.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Supporting | September 2026–June 2027 |
| ACCA | SBR | Supporting | September 2026–June 2027 |
