Question

Which of the following statements are correct if an entity reports in the currency of a hyperinflationary economy?

1- The financial statements should be restated into current measuring units.

2- The gain or loss on the net monetary position should be included in comprehensive income, not in the profit/loss for the year.

3- A general price index should be applied to non- monetary items.

A-1,2 and 3

B- 1 and 2 Only

C- 2 and 3 Only

D- 1 and 3 Only

Answer 1

A) 1,2and 3

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

The basic principle in IAS 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 balance sheet date.

Restatements are made by applying a general price index. Items such as monetary items that are already stated at the measuring unit at the balance sheet date are not restated. Other items are restated based on the change in the general price index between the date those items were acquired or incurred and the balance sheet date.

A gain or loss on the net monetary position is included in net income. It should be disclosed separately.