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Cash
5,150
Share capital (300/100 × 400) 1,200
Retained earnings (balance) 2,750
Noncurrent liabilities 500
Current liabilities
The inventory had been restated assuming that the index has increased proportionately over time. The loan is a monetary item and therefore is not restated.
If the loan had been index linked, then it would have been restated in accordance with the loan agreement.
Consistency of Terminology with Other IFRS
The IASB has identified that paragraph 6 of IAS 29, Financial Reporting in Hyperinflationary Economies, contained an out-of-date description of the measurement
basis used in financial statements. For example, it says assets and liabilities are at cost except “to the extent that property, plant, and equipment and investments may be
revalued.” In other words, it does not reflect that there are now several other statement of financial position categories that may or must be measured on the basis of a
current value (such as fair value) rather than a historical value. The IASB also believes the Standard uses some out-of-date or inconsistent terminology. In particular, it
1. Uses the term “market value” in IAS 29 to describe existing measurement practice instead of the defined term “fair value.”
2. Uses the terms “results of operations” and “net income” when other standards use the term “profit or loss.”
3. Refers to “investments” as nonmonetary assets carried at cost. Most investments are now measured at fair value in accordance with IAS 39.
The IASB has therefore updated IAS 29’s descriptions of current practice. IAS 29 is amended to clarify that a number of assets and liabilities may or must be
measured on the basis of a current value rather than a historical value.
Entities that prepare financial statements on the historical cost basis of accounting do so without regard either to changes in the general level of prices or to increases
in specific prices of assets held. The exceptions to this are those assets that the entity is required to or chooses to measure on a fair value or revaluation basis; for
example, property, plant, and equipment may be revalued and biological assets must be measured at fair value. Some entities, however, present financial statements
that are based on a current cost approach that reflects the effects of changes in the specific prices of assets held.
The previously mentioned amended guidance reflects the fact that a number of assets and liabilities are measured at fair value rather than historical cost.
The following countries should continue to be considered highly inflationary as of September 30, 2009:
Myanmar
Zimbabwe
The following country should be considered highly inflationary for periods beginning on or after December 1, 2009:
Venezuela
The following countries are on the Task Force’s inflation “watch list”:
Democratic Republic of Congo
Ethiopia
Guinea
Iran
Iraq
Sao Tome and Principe
Seychelles
The IASB proposed (September 2010) adding an exemption to IFRS 1 that an entity can apply at the date of transition to IFRS after being subject to severe
hyperinflation. This exemption would allow an entity to measure assets and liabilities at fair value and use that fair value as the deemed cost of those assets and
liabilities in the opening IFRS statement of financial position.
DISCLOSURE
This information has to be disclosed under IAS 29:
1. That the financial statements and other corresponding period data have been restated for changes in the general purchasing power of the reporting currency
2. The basis on which the financial statements are prepared, that is, based on historical cost or current cost approach
3. The nature and level of the price index at the end of the reporting period and any movements on this index in the current and previous reporting period
IFRIC 7, Applying the Restatement Approach under IAS 29, “Financial Reporting in Hyperinflationary Economies,” states that in the period in which the economy
of an entity’s functional currency becomes hyperinflationary, the entity shall apply the requirements of IAS 29 as if the economy had always been hyperinflationary.
The effect is that restatements of nonmonetary items carried at historical cost are made from the dates they were first recognized; for other nonmonetary items the
restatements are made from the dates of the revised current values. Deferred tax items are remeasured in accordance with IAS 12 after restating the nominal carrying
amounts of the nonmonetary items in the opening statement of financial position by applying the measuring unit at that date. These items are restated for the change in
the measuring unit from the date of the opening statement of financial position to the date of the closing statement of financial position.
700
5,150