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Thursday, 6 September 2012

Exception to the implementation of IAS 29 during hyperinflation


Exception to the implementation of IAS 29 during hyperinflation

 

It is not true that International Financial Reporting Standards always require the implementation of IAS 29 Financial Reporting in Hyperinflationary Economies during hyperinflation.

 

IAS 29 states in Par. 8:

 

‘The financial statements of an entity whose functional currency is the currency of a hyperinflationary economy, whether they are based on a historical cost approach or current cost approach, shall be stated in terms of the measuring unit current at the end of the reporting period.’

 

IAS 29 states nothing about an entity whose financial statements are based on financial capital maintenance in units of constant purchasing.

 

The Framework (1989), Par. 104 (a) [now the Conceptual Framework (2010) Par. 4.59 (a)] states:

 

‘Financial capital maintenance can be measured in either nominal monetary units or units of constant purchasing power.’

 

Par. 4.59 (a) applies at all levels of inflation and deflation, including hyperinflation.

 

An entity whose financial statements are based on financial capital maintenance in units of constant purchasing power is thus not required to implement IAS 29 during hyperinflation.
 
 
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Nicolaas Smith

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