Chapter 2: Presentation of IAS 29 information

Presentation in a hyper-inflationary currency

The information required by IAS 29 is presented as the main financial statements. Presentation of restated financial statements as supplementary information to un-restated financial statements is not permitted. Also, IAS 29 discourages separate presentation of the financial statements before restatement.

The prior year comparatives, for both monetary and non-monetary items, are restated in terms of the measuring unit current at the end of the latest reporting period. If prior year financial statements have already been prepared to conform to IAS 29, the current year change in the general price index is applied to the prior year financial statements.

Presentation in a stable currency

An entity whose functional currency is the currency of a hyperinflationary economy might present financial statements in a stable currency. The financial statements are restated for the impact of hyper-inflation before being translated into the stable currency for presentation purposes.

The year-end exchange rate is used to translate the restated financial statements into the presentation currency for all periods presented (that is, including comparatives), unless the entity presents financial statements in a stable currency (currency of a non-hyperinflationary economy).

In this case, the comparative amounts are those that were presented as current year amounts in the relevant prior year’s financial statements. They are not adjusted for subsequent changes in the price level or subsequent changes in exchange rates.

Translation adjustments when IAS 29 is first applied by an entity that presents its consolidated financial statements in a stable currency The comparative amounts in financial statements presented in a stable currency are not adjusted for subsequent changes in the price level or exchange rates. Opening equity reported in the stable currency will be affected by the cumulative effect of restating non-monetary items from the date they were first recognised and the effect of translating those balances to the closing rate. This will result in a difference between the closing equity of the previous year and the opening equity of the current year. In our view, there is an accounting policy choice between recognising this difference directly in equity and recognising it in other comprehensive income as a translation adjustment. For example, country A enters hyper-inflation in November 20X9. A subsidiary in country A is required to report its annual financial statements for the year ended 31 December 20X9 to its foreign parent in a stable currency. The comparative information in the parent’s consolidated financial statements is not restated, because it has already been presented in the stable currency. The difference between the closing balance of shareholders’ equity of the subsidiary in country A at 31 December 20X8 and the opening balance at 1 January 20X9 could be recognised in equity or in other comprehensive income as a translation adjustment. The accounting policy adopted should be disclosed clearly. When deciding which policy to apply, entities need to consider the views of the relevant regulators.

Translation adjustments when applying IAS 29 on an ongoing basis The ongoing re-translation of comparative amounts to closing exchange rates under IAS 21 and the hyper-inflation adjustments required by IAS 29 will lead to a difference in addition to the difference arising on the adoption of hyper-inflation accounting. This is because the rate at which the hyper-inflationary currency depreciates against a stable currency is rarely equal to the rate of inflation. We believe that it is appropriate to separate the difference into two components: the adjustments related to equity items recognised directly in equity; and the remaining difference recognised in other comprehensive income as a translation adjustment. As mentioned, it would also be acceptable to recognise all of the difference in other comprehensive income, given the economic inter-relationship between inflation and exchange rates, or in equity. When deciding which policy to apply, entities need to consider the views of the relevant regulators.