IAS 29

Financial Reporting in Hyper-

inflationary Economy
 Hyperinflation

1 Inflation and Hyperinflation - A Layman View

2 Impact of Hyperinflation

3 Examples of Hyperinflation
 Reason
Supply of Money
> Output

Money
Features of

Why It Happens
Money
IAS 29
Introduction
Why do we need
this?
 Sales

2,00,00,000

1,50,00,000

1,00,00,000

Look at the YoY Growth

50,00,000
in Sales Numbers over
the years
0
2016 2017 2018 2019
Indicators
of Hyperinflation as per
IAS 29
Indicators Investment

Pricing
Measure

Inflation
Credit
First Time
Accounting
Hyperinflation for First
Time
IFRIC 7 deals with the re-measurement
requirements.

Apply the requirements as if the

economy had always been in
Hyperinflation

Requires to prepare the Opening

Balance sheet for the earliest period
presented.
Process Flow

Restate
Financial Ceased to be
Statements Hyperinflationary

1 2 3 4 5

Identify Account for Disclosure

General Gains or
Price Losses on
Index Restatement
General Price Index

1 A price index is a measure of price changes using a percentage scale.

2 Common Examples of General Price Indices are Wholesale Price Index

(WPI), Consumer Price Index (CPI) and Producer Price Index (PPI)

In case an economy does not have a well-reported General Price index

3
for inflation then movements in the exchange rate between the
functional currency and a relatively stable foreign currency as a
measure of inflation.
Re-measurement -
Building Block
Historical Cost Accounting -

Assets - Assets are recorded at the amount of cash or cash equivalents paid or the fair
value of the consideration given to acquire them at the time of their acquisition

Liabilities - Liabilities are recerded at the amount of proceeds received in exchange for
the obligation, at the amounts of cash or cash equivalents expected to be paid to satisfy
the liability in the normal course of business
Re-measurement -
Building Block
Current Cost Accounting -

Assets - Assets are carried at the amount of cash or cash equivalents that would have to
be paid if the same or an equivalent asset was acquired currently.

Liabilities - Liabilities are carried at the undiscounted amount of cash or cash equivalents
that are required to settle the obligation currently.
Re-measurement -
Rules - Historical Cost
OTHER
MONETARY INCOME
AGREEMENT ASSETS AND
ITEMS STATEMENT
LIAB

Adjusted as No Adjustments are Requires All items relating to

provided in the made restatement as per Income Statement
Agreement for IAS 29 to account is restated
Price Level for the change in
Changes the price levels
Re-measurement -
Rules - Current Cost
BALANCE INCOME
SHEET STATEMENT

No Adjustments All items relating to

Needed (Except Income Statement
Adjustments as per is restated
Agreements)
Special Discussion

Property, Plant and Equipment

Inventory

Investments - Equity Method

Cost of Goods Sold

Ceased - Hyperinflation
When an economy ceases to be hyperinflationary and an
entity discontinues the preparation and presentation of
financial statements prepared in accordance with this
Standard, it shall treat the amounts expressed in the
measuring unit current at the end of the previous reporting
period as the basis for the carrying amounts in its
subsequent financial statements
Disclosures
Gain or loss on monetary items [IAS 29.9]

The fact that financial statements and other prior period data have been restated
for changes in the general purchasing power of the reporting currency [IAS
29.39]
Whether the financial statements are based on a historical cost or current cost
approach [IAS 29.39]
Identity and level of the price index at the balance sheet date and moves during
the current and previous reporting period [IAS 29.39]