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IAS 29 FINANCIAL REPORTING IN HYPERINFLATIONARY ECONOMIES

HISTORY OF IAS 29

November

1987

Exposure Draft E31 Financial Reporting in Hyperinflationary

Economies

July 1989 IAS 29 Financial Reporting in Hyperinflationary 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IAS 21has superseded SIC 19 Reporting Currency - Measurement and

Presentation of Financial Statements under IAS 21 and IAS 29

IAS 21has superseded SIC 30 Reporting Currency - Translation from Measurement

Currency to Presentation Currency

IFRIC 7Applying the Restatement Approach under IAS 29 Financial Reporting in

Hyperinflationary Economies

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/standa

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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.


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