IAS29 - IAS - 29 Financial Reporting in Hyperinflationary...

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By: http://www.WorldGAAPInfo.com IAS - 29 Financial Reporting in Hyperinflationary Economies
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By: http://www.WorldGAAPInfo.com International Accounting Standard No 29 (IAS 29) Financial reporting in hyperinflationary economies
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By: http://www.WorldGAAPInfo.com Scope 1. This Standard applies to financial statements and consolidated financial statements of an entity whose functional currency is the currency of a hyperinflationary economy. 2. It is useful, in the midst of a hyperinflationary economy; present the results of operations and financial position in the local currency, without subjecting them to a restatement process. In such economies, the currency loses purchasing power at a rate such that any comparison is misleading figures from transactions and other events at different points in time, even within a year. 3. This Standard does not establish an absolute rate of inflation to consider that when overcome, there is a state of hyperinflation. It is, rather, a problem of criteria to judge when it becomes necessary to restate the financial statements in accordance with this Standard. The state of hyperinflation is indicated by the characteristics of the country's economic environment, which include, but are not limited to, the following: (a) the general population prefers to keep its wealth in the form of non-monetary assets or in a relatively stable foreign currency, while the amounts of local currency obtained are immediately invested to maintain purchasing power of the latter; (b) the general population does not take into consideration the monetary amounts in local currency terms, but does so in terms of another currency relatively stable prices can be set in this currency; (c) sales and purchases on credit take place at prices that compensate for the expected loss of purchasing power during the adjournment, even if the period is short; (d) interest rates, wages and prices are linked to the evolution of a price index and (e) the cumulative rate of inflation over three years approaches or exceeds 100%. 4. It is preferable that all entities that report in the currency of the same hyperinflationary economy apply this Standard from the same date. Notwithstanding the foregoing, this Standard is applicable to any entity's financial statements since the beginning of the year in which they identified the existence of hyperinflation in the country whose currency provides the information. The restatement of financial statements 5. Prices, whether general or specific, change over time as a result of various economic and social forces. The forces acting on the specific market for each product, such as changes in supply and demand or technological change can cause significant increases or decreases in prices, regardless of how the other prices. Moreover, the general causes can result in a change in the general price level and therefore in the general purchasing power of currency. 6.
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This note was uploaded on 06/14/2011 for the course ACCT 101 taught by Professor Ggfthyu during the Spring '11 term at University of Central Punjab.

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IAS29 - IAS - 29 Financial Reporting in Hyperinflationary...

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