IAS 29 Financial Reporting in Hyperinflationary Economies—Applicability of the concept of financial capital maintenance defined in terms of constant purchasing power units

Interpretations Committee tentative agenda decision 

The Interpretations Committee reviewed the following matter and tentatively decided that it should not be added to the Interpretations Committee's agenda. This tentative decision, including recommended reasons for not adding the items to the Interpretations Committee's agenda, will be reconsidered at the Interpretations Committee meeting in January 2014. 

Interested parties who disagree with the proposed reasons, or believe that the explanations may contribute to divergent practices, are encouraged to email those concerns by 20 November 2013 to ifric@ifrs.org. Correspondence will be placed on the public record unless the writer requests confidentiality, supported by good reason, such as commercial confidence. 

IAS 29 Financial Reporting in Hyperinflationary Economies—Applicability of the concept of financial capital maintenance defined in terms of constant purchasing power units 

The Interpretations Committee considered the following two questions: 

a. whether an entity is permitted to use the financial capital maintenance concept defined in terms of constant purchasing power units that is described in the Conceptual Framework when the entity's functional currency is not the currency of a hyperinflationary economy as described in IAS 29 Financial 
Reporting in Hyperinflationary Economies; and 

b. if such use is permitted, whether the entity needs to apply IAS 29 to its financial statements prepared under a specific model of that concept of financial capital maintenance when it falls within the scope of 
IAS 29. 

The Interpretations Committee observed that the guidance in the Conceptual Framework is written to assist the IASB in the development of Standards and that it is also used in the development of an accounting policy only when no IFRSs specifically apply to a particular transaction, other event or condition and no IFRSs deal with similar and related issues. Consequently the guidance in the Conceptual Framework relating to the use of a particular capital maintenance concept cannot be used to override the requirements of individual IFRSs. An entity is not permitted to apply a concept of capital maintenance that conflicts with the existing requirements in a particular IFRS, when applying that IFRS. 

In addition, the Interpretations Committee noted that the results of the outreach indicate that these issues are not widespread. For this reason the Interpretations Committee [decided] not to add these issues to its 
agenda. 

The IASB staff´s guidance to the IASB Interpretations Committee was as follows:

23. Consequently, we are of the view that IFRSs PROHIBIT an entity from preparing its financial statements under the concept of financial capital maintenance defined in constant purchasing power units unless the entity falls within the scope of IAS 29.

STAFF PAPER Agenda ref 12 PROJECT IAS 29 Financial Reporting in Hyperinflationary Economies PAPER TOPIC Applicability of the concept of financial capital maintenance defined in constant purchasing power units

The above guidance earned the IASB Staff this award.