PAS 29:

Financial Reporting In
Hyperinflationary Economy

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PAS 29 applies to:

 Entity’s functional currency is that of a

hyperinflation economy.

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INFLATION

 Is normally ignored in accounting due to the stable

monetary unit assumption. However, if inflation is very
high (hyper) it can no longer be ignored.

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PAS 29
 does NOT prescribe an absolute rate at which
hyperinflation is deemed to arise. This is a matter of
judgment.

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 INDICATORS IN DETERMINING HYPERINFLATION

a. The general b. The general c. Sales and purchases

population prefers to population regards on credit take place at
keep its wealth in non monetary amounts not in prices that compensate
monetary assets or in a terms of the local for the expected loss of
relatively stable foreign currency but in terms of purchasing power during
currency. Amounts of a relatively stable foreign the credit period, even if
local currency held are currency. Prices may be the period is short;
immediately invested to quoted in the currency;
maintain purchasing
power;

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INDICATORS IN DETERMINING HYPERINFLATION

d. Interest rates, e. The cumulative

wages, and prices inflation rate over
are linked to a price three years is
index; and approaching, or
exceeds, 100%.
(PAS 29.3)

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CORE PRINCIPLE

 The basic principle in AIS 29 is that 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. [IAS 29.8]

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CORE PRINCIPLE

 PAS 29 prohibits the presentation of the required information as

supplement to unrestated financial statements.

 PAS 29 discourages the separate presentation of the financial statements

before restatement.

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 RESTATEMENT OF FINANCIAL STATEMENTS
Financial statements are restated by applying a general index as follows:

Statement of Financial Position

a. Monetary items* - not restated

b. Non-monetary items* - restated

measured at cost
c. Non-monetary items measured at - not restated. However, if the fair
fair value or NRV at the end of the value or NRV was determined at a
reporting period. date other than the end of the
reporting period, that fair value or
NRV is nonetheless restated, from
the date it was determined.
Statements of Comprehensive Income & Statement of Cash Flows

d. All items are restated.

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 The corresponding figures for prior period(s), whether monetary or
nonmonetary, are all restated.

 The gain or loss on the net monetary position resulting from

the restatements is recognized in profit or loss.

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 BASIS FOR MEASUREMENT
 Constant Peso Accounting
- Translates financial statements in terms of current purchasing power through the use of price
index from their historical costs using the formula:

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑝𝑟𝑖𝑐𝑒 𝑖𝑛𝑑𝑒𝑥 (index as of end of reporting period)

Historical Cost X
𝐻𝑖𝑠𝑡𝑜𝑟𝑖𝑐𝑎𝑙 𝑝𝑟𝑖𝑐𝑒 𝑖𝑛𝑑𝑒𝑥 (index as of acquisition date)

 Current Cost Costing

- Translates financial statements in terms of their current costs or the cost to aquire the
items.

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Illustration:
Entity A operates in a hyperinflationary economy. Entity A’s building has a carrying amount
of ₱1M on December 31 20x2. The building was acquired on June 21, 20x0. The general
price indices are as follows:
June 21, 20x0 100
December 31, 20x1 150
Average- 20x2 180
December 31, 20x2 200

 The building’s carrying amount is restated as follows:

200 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑝𝑟𝑖𝑐𝑒 𝑖𝑛𝑑𝑒𝑥, 𝐷𝑒𝑐. 31, 20𝑥2
1M X
100 ℎ𝑖𝑠𝑡𝑜𝑟𝑖𝑐𝑎𝑙 𝑝𝑟𝑖𝑐𝑒 𝑖𝑛𝑑𝑒𝑥, 𝐽𝑢𝑛𝑒 21, 20𝑥0

= 2M restated amount to current measuring unit as of Dec. 31, 20x2

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 Assume that the 20x2 depreciation expense on the building is
₱200,000. The depreciation is restated in the same manner as
follows: (200,000 x 200/100)= 400,000.

 Assume that the carrying amount of the building is ₱1.2M on

December 31, 20x1. This corresponding figure is restated also
in the same manner as follows: (1.2M x 200/100) = 2.4M

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 CONSOLIDATED FINANCIAL STATEMENTS

 If any of the entities belonging to a group entity reports in a

hyperinflationary economy, the financial statements of that entity needs to
be restated first before they are consolidated in the group’s financial
statements.

 If a foreign operation reports in a hyperinflationary economy, its financial

statements are also restated first under PAS 29 before the are translated
in accordance with PAS 21.

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Disclosures

a. The fact that the b. Whether the c. The identity and

financial statements, financial statements level of the price index
including are based on historical at the end of the
corresponding figures, cost or current cost. reporting period and
have been restated for the movements during
changes in the general the current and
purchasing power of previous reporting
the reporting currency. periods.

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Thank You!
Any questions?

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