hyperinflation
PAS 29: Financial Reporting in Hyperinflationary Economies
PAS 29 shall be applied to the financial statements, including the consolidated financial statements, of any entity whose functional currency is the currency of a hyperinflationary economy.
Hyperinflation refers to loss of purchasing power of money at such a rate that comparison of amounts from transactions and other events that have occurred at different times, even within the same accounting period, is misleading.
Although there is no universally accepted definition of hyperinflation, it may be indicated by factors such as: the general population holding their wealth in nonmonetary assets; prices, interest and wages linked to a price index; and the cumulative effect of inflation over three years is close to or in excess of 100%
Financial statements, including comparative information, must be expressed in units of the functional currency current as at the end of the reporting period. Restatement to current units of currency is made using the change in a general price index. The gain or loss on the net monetary position must be included in profit or loss for the period and separately disclosed.
General price level changes and the purchasing power of money have an inverse relationship. An increase in general price level means that the purchasing power of money has decreased – a condition known as inflation. The opposite is deflation.
Constant peso accounting, the financial statements are restated to measuring unit current at the end of the accounting period. Meaning, the financial statements are adjusted to reflect changes in purchasing power.
In Statement of Financial Position, non-monetary items amount are restated because they are not expressed in terms of the measuring unit current at the end of accounting period while monetary items are not restated because they are already fixed or determinable amount of money. Retained earnings, a residual amount or a balancing figure after restatement, is
PAS 29 shall be applied to the financial statements, including the consolidated financial statements, of any entity whose functional currency is the currency of a hyperinflationary economy.
Hyperinflation refers to loss of purchasing power of money at such a rate that comparison of amounts from transactions and other events that have occurred at different times, even within the same accounting period, is misleading.
Although there is no universally accepted definition of hyperinflation, it may be indicated by factors such as: the general population holding their wealth in nonmonetary assets; prices, interest and wages linked to a price index; and the cumulative effect of inflation over three years is close to or in excess of 100%
Financial statements, including comparative information, must be expressed in units of the functional currency current as at the end of the reporting period. Restatement to current units of currency is made using the change in a general price index. The gain or loss on the net monetary position must be included in profit or loss for the period and separately disclosed.
General price level changes and the purchasing power of money have an inverse relationship. An increase in general price level means that the purchasing power of money has decreased – a condition known as inflation. The opposite is deflation.
Constant peso accounting, the financial statements are restated to measuring unit current at the end of the accounting period. Meaning, the financial statements are adjusted to reflect changes in purchasing power.
In Statement of Financial Position, non-monetary items amount are restated because they are not expressed in terms of the measuring unit current at the end of accounting period while monetary items are not restated because they are already fixed or determinable amount of money. Retained earnings, a residual amount or a balancing figure after restatement, is