Illustration 1: Restatement of Financial Statements- Historical to Constant Peso

ABC Co. operates in a hyperinflationary economy. Its unrestated financial statements are provided
below:

ABC Company
Statement of Financial Position
As of December 31, 20x2

20x2 20x1
ASSETS
Cash P20,000 P15,000
Accounts receivable 40,000 30,000
Allowance for Doubtful Accounts (10,000) (5,000)
Inventory(at cost) 50,000 40,000
Land (at cost) 100,000 100,000
Building(at cost) 500,000 500,000
Accumulated Depreciation (200,000) (150,000)
TOTAL ASSETS P500,000 P530,000
LIABILITIES AND EQUITY
Accounts Payable P20,000 P47,000
Loan Payable 100,000 80,000
TOTAL LIABILITIES 120,000 127,000
Share capital 300,000 300,000
Retained Earnings 80,000 103,000
TOTAL EQUITY 380,000 403,000
TOTAL LIABILITIES AND EQUITY P500,000 P530,000

ABC Company
Statement of Profit or Loss and Other Comprehensive Income
For the year ended December 31,20x2

Sales P400,000
Cost of Sales:
Inventory, January 1 40,000
Purchases 300,000
Total Goods Available for Sale 340,000
Inventory, December 31 (50,000) (290,000)
Gross Income 110,000
Depreciation Expense (50,000)
Distribution Costs (35,000)
Bad Debts Expense (5,000)
Finance Cost (10,000)
Profit before tax 10,000
Income tax expense (3,000)
Profit for the year 7,000
Other comprehensive income -
Total Comprehensive Income for the year P7,000
 ABC Company
Statement of Changes in Equity
For the year ended December 31, 20x2

Share Capital Retained Earnings Total Equity

Balance, Jan. 1, 20x2 P300,000 P103,000 P403,000
Changes in equity for 20x2
Dividends (30,000) (30,000)
Total Comprehensive income - 7,000 7,000
Balance, Dec. 31, 20x2 P300,000 P80,000 P380,000

ABC Company
Statement of Cash Flows
For the year ended December 31, 20x2

Cash flow from operating activities

Profit before taxation P10,000
Adjustments for:
Depreciation expense 50,000
60,000
Increase in Accounts Receivable, net (5,000)
Increase in Inventory (10,000)
Decrease in Accounts Payable (27,000)
Cash Generated from Operations 18,000
Income taxed paid (3,000)
Net cash from operating activities 15,000
Cash flows from investing activities:
Cash flows from financing activities:
Proceeds from long-term borrowings 20,000
Dividends paid (30,000)
Net cash used in financing activities (10,000)
Net increase in cash 5,000
Cash at beginning of period 15,000
Cash at end of period P20,000

Additional Information:
 The land and building were acquired on April 1, 20x0
 The share capital was issued on March 1, 20x0
 Sale, purchases and expenses (except interest expense) were incurred evenly during the year.
 Interest expense was recognized and paid on December 31, 20x2
 Dividends of P30,000 were declared and paid on December 31, 20x2
 Selected values of general price indices(CPI) are shown below:
March 1, 20x0 100
April 1, 20x0 100
Average for 20x1 110
December 31, 20x1 120
Average for 20x2 125
 December 31, 20x2 140

Requirement: Prepare constant peso financial statements

Illustration 2: Gain or loss on net monetary position

ABC Co. has the following information during 20x1

Sales(all on account) made evenly throughout 20x1 400,000

Cash collections from customers on account made evenly throughout 20x1 220,000
Purchases(all on account) made evenly throughout 20x1 200,000
Cash payments to suppliers on account made evenly throughout 20x1 180,000
Land purchased for cash on February 1, 20x1 40,000
Equipment purchased on credit on March 1, 20x1 and paid on April 1, 20x1 30,000
Proceeds on a loan taken on July 1, 20x1 100,000
Investment in held for trading securities sold on August 1, 20x1 60,000
Cash dividends declared on October 1, 20x1 and paid on December 31, 20x1 50,000
Operating expenses paid evenly throughout 20x1 120,000
Share Capital Issued on December 31, 20x1 80,000
Partial payment on the loan on December 31, 20x1 50,000
Monetary assets:
January 1, 20x1 30,000
December 31, 20x1 200,000
Monetary liabilities:
January 1, 20x1 15,000
December 31, 20x1 85,000

The following are selected values of CPI-U for 20x1:

1-Jan 100
1-Feb 110
1-Mar 120
1-Apr 130
1-Aug 140
1-Oct 150
31-Dec 160
Average for the year 125

Requirement: Compute for the gain or loss on net monetary position (purchasing power gain or loss)
Illustration 4: Non-monetary items carried at other than cost

ABC Co. has previously been preparing financial statements restated in accordance with PAS 29 As of
December 31, 20x1, the following are among the assets of ABC Co.:
 Inventory from purchases made evenly throughout 20x1 with historical cost of P100,000 and net
realizable value of P80,000 as of year-end.
 Held for trading securities acquired on January 1, 20x1 for P50,000. The fair value of the
securities as of year-end is P60,000
 Land acquired on January 1, 20x0 for P 1,000,000 was revalued to P1,200,000 on July 1, 20x1
The following are the selected general price index numbers:
January 1, 20x0 100
January 1, 20x1 120
July 1, 20x1 125
December 31, 20x1 140

Requirement: Determine the amounts to be recognized for the assets listed above in the
restated financial statements

Illustration 5: Equity-First time adoption

During 20x1, the economy of ABC Co.’s functional currency became hyperinflationary. ABC Co. is
preparing its first financial statements prepared under PAS 29. The following information before
restatement was made available:
Cash 100 Accounts payable 300
Accounts Receivable 350 Share Capital 500
Prepaid Expenses 50 Revaluation surplus 100
Land 1,000 Retained earnings 600
Total Assets 1,500 Total liabilities and equity 1,500

Additional information:
 The prepaid expenses were recognized evenly during the year.
 The land was acquired on January 1, 20x0 for P900 but was revalued to P 1,000 on July
1, 20x1. A revaluation surplus of P100 was recognized in equity.
 The share capital was issued on January 1, 20x0
 The following are the selected general price index numbers:
January 1, 20x0 100
January 1, 20x1 120
July 1, 20x1 125
December 31, 20x1 140
Average for 20x1 130

Requirement: Compute for the restated shareholders ’equity.