TaxTMI 
TaxTMI 
TaxTMI 
Financial Reporting in Hyperinflationary Economies
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....becomes necessary. Hyperinflation is indicated by characteristics of the economic environment of a country which include, but are not limited to, the following: (a) 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; (b) 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; (c) 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; (d) interest rates, wages and prices are linked to a price index; and (e) the cumulative inflation rate over three years is approaching, 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. Nevertheless, this Standard applies to the financial statements of any entity from the beginning of the reporting period in which it identifies the existence of hyperinflation....
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....nt presentation currency, paragraphs 42(b) and 43 of Ind AS 21, The Effects of Changes in Foreign Exchange Rates, apply. 9 The gain or loss on the net monetary position shall be included in profit or loss and separately disclosed. 10 The restatement of financial statements in accordance with this Standard requires the application of certain procedures as well as judgement. The consistent application of these procedures and judgements from period to period is more important than the precise accuracy of the resulting amounts included in the restated financial statements. Historical cost financial statements Balance sheet 11 Balance sheet amounts not already expressed in terms of the measuring unit current at the end of the reporting period are restated by applying a general price index. 12 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 money. 13 Assets and liabilities linked by agreement to changes in prices, such as index linked bonds and loans, are adjusted in accordance with the agreement in order to ascertain t....
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....ted amounts of inventories are reduced to net realisable value. 20 An investee that is accounted for under the equity method may report in the currency of a hyperinflationary economy. The balance sheet and statement of profit and loss of such an investee are restated in accordance with this Standard in order to calculate the investor's share of its net assets and profit or loss. When the restated financial statements of the investee are expressed in a foreign currency they are translated at closing rates. 21 The impact of inflation is usually recognised in borrowing costs. It is not appropriate both to restate the capital expenditure financed by borrowing and to capitalise that part of the borrowing costs that compensates for the inflation during the same period. This part of the borrowing costs is recognised as an expense in the period in which the costs are incurred. 22 An entity may acquire assets under an arrangement that permits it to defer payment without incurring an explicit interest charge. Where it is impracticable to impute the amount of interest, such assets are restated from the payment date and not the date of purchase. 23 [Refer Appendix 1] 24 At the beginning o....
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....closed, it may be helpful if they are presented together with the gain or loss on net monetary position in the statement of profit and loss. Current cost financial statements Balance sheet 29 Items stated at current cost are not restated because they are already expressed in terms of the measuring unit current at the end of the reporting period. Other items in the balance sheet are restated in accordance with paragraphs 11 to 25. Statement of profit and loss 30 The current cost statement of profit and loss, before restatement, generally reports costs current at the time at which the underlying transactions or events occurred. Cost of sales and depreciation are recorded at current costs at the time of consumption; sales and other expenses are recorded at their money amounts when they occurred. Therefore all amounts need to be restated into the measuring unit current at the end of the reporting period by applying a general price index. Gain or loss on net monetary position 31 The gain or loss on the net monetary position is accounted for in accordance with paragraphs 27 and 28. Taxes 32 The restatement of financial statements in accordance with this Standard may give ri....
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....iscontinues 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 39 The following disclosures shall be made: (a) the fact that the financial statements and the corresponding figures for previous periods have been restated for the changes in the general purchasing power of the functional currency and, as a result, are stated in terms of the measuring unit current at the end of the reporting period; (b) whether the financial statements are based on a historical cost approach or a current cost approach; and (c) the identity and level of the price index at the end of the reporting period and the movement in the index during the current and the previous reporting period. (d) the duration of the hyperinflationary situation existing in the economy. 40 The disclosures required by this Standard are needed to make clear the basis of dealing with the effects of inflation in the financial statements. They are also intended to provide....