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PAS 29 does not establish an absolute rate at which hyperinflation is deemed to arise - but allows
judgment as to when restatement of financial statements becomes necessary. Characteristics of the
economic environment of a country which indicate the existence of hyperinflation include:
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
e) The cumulative inflation rate over three years approaches, or exceeds, 100%.
a) The financial statements of an entity that reports in the currency of a hyperinflationary economy
should be stated in terms of the measuring unit current at the end of the reporting period.
Comparative figures for prior period(s) should be restated into the same current measuring unit.
b) As a rule, restatements are made by applying a general price index. Items such as monetary
items that are already stated at the measuring unit at the end of the reporting period are not
restated.
c) Other items such as non monetary assets, nonmonetary liabilities and equity components other
than retained earnings and revaluation surplus are restated based on the change in the general
price index between the date those items were acquired or incurred and the end of the reporting
period. The following exceptions to this rule shall be followed:
Inventories that are carried at net realizable value and financial assets at that have been
remeasured to their fair values are not restated.
Assets that have been revalued shall be restated based on the general price index at the time
the asset had been revalued.
d) Retained earnings shall be the balancing figure derived from the restated total assets, restated
total liabilities and other equity items. While any revaluation surplus in equity shall be eliminated.
e) Income and expenses in the income statement shall be restated using the general price index
when the transaction was recorded, however the average price index may be used for practical
purposes.
f) A gain or loss on the net monetary position is included in net income. It should be disclosed
separately. This shall be computed using the formula below:
OR
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Example:
The following information pertains to Anastasia Company for the year ended December 31, 2016:
The sales, purchases, expenses and income tax accrued evenly during the year. Selected general
price index numbers are:
January 1 100
December 31 300
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