Professional Documents
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ACCOUNTING STANDARDS
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PAS 29 Financial Reporting in
Hyperinflationary Economies
Learning Objectives
• State the core principle under PAS 29.
• Describe the restatement procedures under PAS 29.
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The Stable Monetary Assumption
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Price level changes
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Hyperinflation
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Indicators of hyperinflation
1. The general population prefers to keep its wealth in non-monetary
assets or in a relatively stable foreign currency. Amounts of local
currency held are immediately invested to maintain purchasing power;
2. The general population regards monetary amounts not in terms of the
local currency but in terms of a relatively stable foreign currency.
Prices may be quoted in that currency;
3. Sales and purchases on credit take place at prices that compensate for
the expected loss of purchasing power during the credit period, even if
the period is short;
4. Interest rates, wages and prices are linked to a price index; and
5. The cumulative inflation rate over three years is approaching, or
exceeds, 100%.
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Core principle
• The financial statements of an entity whose functional currency is
the currency of a hyperinflationary economy shall be stated in terms
of the measuring unit current at the end of the reporting
period.
• The comparative information for the previous period shall also be
stated in terms of the measuring unit current at the end of
the reporting period.
• Presentation of information as a supplement to unrestated financial
statements is not permitted.
• Separate presentation of the financial statements before
restatement is discouraged.
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Restatement of financial statements
• Monetary items are not restated because they are already expressed in
terms of the monetary unit current at the end of the reporting period.
• Monetary items are money held and items to be received or paid in fixed
or determinable amount of money without reference to future prices of
specific goods or services. Monetary items include monetary assets and
monetary liabilities.
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Examples of Monetary assets
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Examples of Monetary liabilities
1. Financial liabilities at amortized cost (debt instruments), e.g.,
accounts, notes, bonds, and finance lease payables.
2. Accrued expenses payable in fixed and determinable amounts of
money.
3. Refundable deposits, e.g., security deposits on leases to be returned to
tenants at the end of the lease term and deposits for returnable
containers.
4. Dividends payable
• All other items that cannot be classified as monetary items are non-
monetary items, except of “retained earnings.” Retained earnings is
the a balancing figure after restatement.
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Examples of Nonmonetary assets
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Examples of Nonmonetary liabilities
• Equity items such as share capital and share premium are also
nonmonetary items and thus restated.
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Non-monetary items carried at other than cost
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Restatement of financial statements
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Formula for restatement
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Gain or loss on net monetary position
The gain or loss on the net monetary position (also called ‘purchasing
power gain or loss’) is recognized in profit or loss.
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APPLICATION OF
CONCEPTS
PROBLEM 2: FOR CLASSROOM DISCUSSION
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QUESTIONS????
REACTIONS!!!!!
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END
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