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Friday, 16 September 2011

Daily US Dollar parallel rate or daily index required during hyperinflation

Daily US Dollar parallel rate or daily index required during hyperinflation

Hyperinflation is defined as an exceptional circumstance by the IASB. All non–monetary items – variable and constant items – in Historical Cost or Current Costs period-end financial statements are required to be restated in terms of IAS 29 Financial Reporting in Hyperinflationary Economies during hyperinflation by applying the period–end CPI to make the restated HC or CC financial reports more useful. This normally does nothing to the real values of the restated non–monetary items unless they are accepted by the tax authorities as the new real values for these companies.

The only way a country in hyperinflation can stabilize its real or non–monetary economy is by applying the daily US Dollar parallel rate or a Brazilian–style daily index supplied by the government in the valuing of all non–monetary items instead of the period–end CPI.

Nicolaas Smith

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