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Educational Material on Ind AS 29 Financial Reporting in Hyper-inflationary Economies

Educational Material on Ind AS 29 Financial Reporting in Hyper-inflationary Economies

Ind AS 29 Financial Reporting in Hyper-inflationary Economies : Ind AS 29 Financial Reporting in Hyper inflationary Economies applies where an entity’s functional currency is that of a hyper inflationary economy. The standard does not prescribe when hyperinflation arises but requires the financial statements (and corresponding figures for previous periods) of an entity with a functional currency that is hyper inflationary to be restated for the changes in the general pricing power of the functional currency. Ind AS 29 was issued in July 1989 and is operative for periods beginning on or after 1 January 1990.

History of Ind AS 29

November 1987Exposure Draft E31 Financial Reporting in Hyper inflationary Economies
July 1989Ind AS 29 Financial Reporting in Hyper inflationary Economies
1 January 1990Effective date of Ind AS 29 (1989)
1994Ind AS 29 was reformatted
22 May 2008Ind AS 29 amended for Annual Improvements to IFRSs 2007
1 January 2009Effective date of the May 2008 revisions to Ind AS 29

Educational Material on Ind AS 29 Financial Reporting in Hyper-inflationary Economies

Ind AS 29 Financial Reporting in Hyper-inflationary Economies : This Standard shall be applied to the financial statements, including the consolidated financial statements, of any entity whose functional currency is the currency of a hyper inflationary economy. This Standard does not establish an absolute rate at which hyperinflation is deemed to arise. It is a matter of judgement when restatement of financial statements in accordance with this Standard becomes necessary. Hyperinflation is indicated by characteristics of the economic environment of a country which include, but are not limited to, the following:

(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; and (e) the cumulative inflation rate over three years is approaching, or exceeds, 100%. 

Objective of Ind AS 29

The objective of Ind AS 29 is to establish specific standards for entities reporting in the currency of a hyper inflationary economy, so that the financial information provided is meaningful.

Scope of Ind AS 29 

1 This Standard shall be applied to the financial statements, including the consolidated financial statements, of any entity whose functional currency is the currency of a hyper inflationary economy.

2 In a hyper inflationary economy, reporting of operating results and financial position in the local currency without restatement is not useful. Money loses purchasing power at such a rate that comparison of amounts from transactions and other events that have occurred at different times, even within the same accounting period, is misleading.

3 This Standard does not establish an absolute rate at which hyperinflation is deemed to arise. It is a matter of judgement when restatement of financial statements in accordance with this Standard becomes necessary.

Disclosure of Ind AS 29 

  • Gain or loss on monetary items [Ind AS 29.9]
  • The fact that financial statements and other prior period data have been restated for changes in the general purchasing power of the reporting currency [Ind AS 29.39]
  • Whether the financial statements are based on an historical cost or current cost approach [Ind AS 29.39]
  • Identity and level of the price index at the balance sheet date and moves during the current and previous reporting period [Ind AS 29.39]

Relevant link to download the Educational Material: 

Educational Material on Ind AS 29 Financial Reporting in Hyper-inflationary Economies 

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Educational Material on Ind AS 29 Financial Reporting in Hyper-inflationary Economies

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