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IAS 29 FINANCIAL REPORTING IN HYPERINFLATIONARY ECONOMIES
HISTORY OF IAS 29
November
1987
Exposure Draft E31 Fi nancial Reporting i n Hyperinfl ati onary
Economies
July 1989 IAS 29 Financi al Reporting i n Hyperi nflati onary Economies
1 January
1990
Effective date of IAS 29 (1989)
1994 IAS 29 was reformatted
22 May
2008
IAS 29 amended for Annual Improvements to IFRSs 2007
1 January
2009
Effective date of the May 2008 revisions to IAS 29
RELATED INTERPRETATIONS
IAS 21 has superseded SIC 19 Reporting Currency - Measurement and
Presentati on of Fi nancial Statements under IAS 21 and IAS 29
IAS 21 has superseded SIC 30 Reporting Currency - Translati on from Measurement
Currency to Presentati on Currency
IFRIC 7 Applying the Restatement Approach under IAS 29 Financi al Reporting in
Hyperinfl ationary Economi es
Issues Relating to This Standard that IFRIC Did Not Add to Its Agenda
SUMMARY OF IAS 29
Objective of IAS 29
The objective of IAS 29 is to establish specific standards for entities reporting in the
currency of a hyperinflationary economy, so that the financial information provided is
meaningful.
Restatement of Financial Statements
The basic principle in IAS 29 is that the financial statements of an entity that reports in
the currency of a hyperinflationary economy should be stated in terms of the measuring
unit current at the balance sheet date. Comparative figures for prior period(s) should be
restated into the same current measuring unit. [IAS 29.8]
Restatements are made by applying a general price index. Items such as monetary items
that are already stated at the measuring unit at the balance sheet date are not restated.
Other items are restated based on the change in the general price index between the
date those items were acquired or incurred and the balance sheet date.
IAS Plus: IAS 29, Financial Reporting in Hyperinflationary Economies http://www.iasplus.com/standard/ias29.htm
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A gain or loss on the net monetary position is included in net income. It should be
disclosed separately. [IAS 29.9]
The restated amount of a non-monetary item is reduced, in accordance with appropriate
IFRSs, when it exceeds its the recoverable amount. [IAS 29.19]
The Standard does not establish an absolute rate at which hyperinflation is deemed to
arise - but allows judgement as to when restatement of financial statements becomes
necessary. Characteristics of the economic environment of a country which indicate the
existence of hyperinflation include: [IAS 29.3]
the general population prefers to keep its wealth in non-monetary assets or in a
relatively stable foreign currency. Amounts of local currency held are immediately
invested to maintain purchasing power;
the general population regards monetary amounts not in terms of the local currency
but in terms of a relatively stable foreign currency. Prices may be quoted in that
currency;
sales and purchases on credit take place at prices that compensate for the expected
loss of purchasing power during the credit period, even if the period is short;
interest rates, wages, and prices are linked to a price index; and
the cumulative inflation rate over three years approaches, or exceeds, 100%.
IAS 29 describes characteristics that may indicate that an economy is hyperinflationary.
However, it concludes that it is a matter of judgement when restatement of financial
statements becomes necessary.
When an economy ceases to be hyperinflationary and an entity discontinues the
preparation and presentation of financial statements in accordance with IAS 29, it should
treat the amounts expressed in the measuring unit current at the end of the previous
reporting period as the basis for the carrying amounts in its subsequent financial
statements. [IAS 29.38]
Disclosure
Gain or loss on monetary items [IAS 29.9]
The fact that financial statements and other prior period data have been restated for
changes in the general purchasing power of the reporting currency [IAS 29.39]
Whether the financial statements are based on an historical cost or current cost
approach [IAS 29.39]
Identity and level of the price index at the balance sheet date and moves during the
current and previous reporting period [IAS 29.39]
September 2009: Hyperinflationary countries as of 31 March 2009
The International Practices Task Force (IPTF) of the AICPA's Centre for Audit Quality
monitors the status of 'highly inflationary' countries. The Task Force's criteria for
identifying such countries are similar to those for identifying 'hyperinflationary economies'
under IAS 29. The IPTF has issued a report of discussions with SEC staff on the IPTF's
recommendations of which countries should be considered highly inflationary as of 31
March 2009. Those countries are:
Myanmar, and
Zimbabwe.
The following countries are on the Task Force's inflation 'watch list': Ethiopia, Guinea,
Iran, Iraq, Sao Tome and Prncipe, Seychelles, and Venezuela. Venezuela is likely to
join the list for 31 December 2009 reporting. Here is a link to the Minutes of the IPTF
Meetings.
IAS Plus: IAS 29, Financial Reporting in Hyperinflationary Economies http://www.iasplus.com/standard/ias29.htm
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