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.
Nicolaas Smith
Copyright (c) 2005-2012 Nicolaas J Smith. All rights reserved. No reproduction without permission.
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