IAS 29

Financial Reporting in Hyperinflationary Economies

1Objective and scope

IAS 29 applies to the financial statements, including consolidated financial statements, of any entity whose functional currency is the currency of a hyperinflationary economy. Historical cost financial statements lose their meaning in such an economy, since the purchasing power of the currency changes materially even within a single reporting period, so the standard requires restatement in terms of the measuring unit current at the reporting date.

2Key definitions

3Restatement mechanics

• Non-monetary items (e.g. inventory, PPE, equity) are restated by applying the change in a general price index between the date of acquisition (or the date of the last revaluation) and the reporting date
• Monetary items (cash, receivables, payables) are NOT restated, because they are already expressed in the current measuring unit at the reporting date
• The gain or loss on the entity's net monetary position (arising because holding net monetary assets loses purchasing power in an inflationary environment, while holding net monetary liabilities gains it) is calculated and included in profit or loss
• Comparative amounts from a prior period are also restated into the measuring unit current at the LATEST reporting date, not left at their originally reported figures

4Presentation and disclosure

• The fact that the financial statements have been restated for changes in the general purchasing power of the functional currency, and that they are stated in terms of the measuring unit current at the reporting date
• The identity and level of the price index used, and its movement during the current and previous reporting period
• The gain or loss on the net monetary position

5Examinable focus