PAS 29

• Under the stable monetary assumption, the purchasing power of money is assumed to be stable. Therefore, inflation is ignored.
• If the general price level increases, this means that the purchasing power of money decreased — a condition known as inflation.
• If the general price level decreases, this means that the purchasing power of money has increased — a condition known as deflation.
• Hyperinflation

  • Occurs when inflation is “very high.”PAS 29 does not establish an absolute rate at which hyperinflation is deemed to arise. This is a matter of judgment.
• The financial statements of an entity whose functional currency is the currency of a hyperinflationary economy shall be stated in terms of the measuring unit current at the end of the reporting period.
• The comparative information for the previous period shall also be stated in terms of the measuring unit current at the end of the reporting period.
• Presentation of information as a supplement to unrestated financial statements is not permitted.
• Separate presentation of the financial statements before restatement is discouraged.
• Monetary Item

  Not restated
• Non-monetary items measured at cost

  Restated
• Non-monetary items measured at fair value or NRC at the end of the reporting period

  Not restated. However, if the fair value or NRV was determined as a date other than the end of the reporting period, the fair value or NRV is nonetheless restated, from the date it was determined.
• When it is impracticable to determine the historical price indices, such as for transactions recurring very frequently, the average general price index for the period may be used.
• The gain or loss on the net monetary position (also called ‘purchasing power gain or loss’) is recognized in profit or loss.
• Indicators of hyperinflation

  • The general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency
  • 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
  • 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
  • Interest rates, wages and prices are linked to a price index
  • The cumulative inflation rate over three years is approaching, or exceeds, 100%