Contents
IFRIC INTERPRETATION 7
APPLYING THE RESTATEMENT APPROACH UNDER IAS 29 FINANCIAL REPORTING IN HYPERINFLATIONARY ECONOMIES
REFERENCES
BACKGROUND
1
ISSUES
2
CONSENSUS
3
EFFECTIVE DATE
6
FOR THE ACCOMPANYING GUIDANCE LISTED BELOW, SEE PART B OF THIS EDITION
ILLUSTRATIVE EXAMPLE
FOR THE BASIS FOR CONCLUSIONS, SEE PART C OF THIS EDITION
BASIS FOR CONCLUSIONS
IFRIC Interpretation 7
Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies
(IFRIC 7) is set out in
paragraphs 1–6
. IFRIC 7 is accompanied by an
illustrative example
and a
Basis for Conclusions
. The scope and authority of Interpretations are set out in the
Preface to IFRS Accounting Standards
.
IFRIC Interpretation 7
Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies
References
Income Taxes
Financial Reporting in Hyperinflationary Economies
Background
1
This Interpretation provides guidance on how to apply the requirements of
in a reporting period in which an entity identifies
1
the existence of hyperinflation
[
Refer:
IAS 29 paragraphs 2 and 3
]
in the economy of its functional currency, when that economy was not hyperinflationary in the prior period, and the entity therefore restates its financial statements in accordance with
.
Issues
2
The questions addressed in this Interpretation are:
(a)
how should the requirement ‘… stated in terms of the measuring unit current at the end of the reporting period’ in
paragraph 8 of IAS 29
be interpreted when an entity applies the Standard?
(b)
how should an entity account for opening deferred tax
[
Refer:
]
items in its restated financial statements?
Consensus
3
In the reporting period in which an entity identifies the existence of hyperinflation
[
Refer:
IAS 29 paragraphs 2 and 3
]
in the economy of its functional currency, not having been hyperinflationary in the prior period, the entity shall apply the requirements of
as if the economy had always been hyperinflationary. Therefore, in relation to non‑monetary items
[
Refer:
IAS 29 paragraphs 12–14
]
measured at historical cost, the entity’s opening statement of financial position at the beginning of the earliest period presented in the financial statements shall be restated to reflect the effect of inflation from the date the assets were acquired and the liabilities were incurred or assumed until the end of the reporting period. For non‑monetary items carried in the opening statement of financial position at amounts current at dates other than those of acquisition or incurrence, that restatement shall reflect instead the effect of inflation from the dates those carrying amounts were determined until the end of the reporting period.
[
Refer:
Basis for Conclusions paragraphs BC5–BC17
]
4
At the end of the reporting period, deferred tax items are recognised and measured in accordance with
. However, the deferred tax figures in the opening statement of financial position for the reporting period shall be determined as follows:
(a)
the entity remeasures the deferred tax items in accordance with
after it has restated the nominal carrying amounts of its non‑monetary items
[
Refer:
IAS 29 paragraphs 12–14
]
at the date of the opening statement of financial position of the reporting period by applying the measuring unit at that date.
(b)
the deferred tax items remeasured in accordance with (a) are restated for the change in the measuring unit from the date of the opening statement of financial position of the reporting period to the end of that reporting period.
The entity applies the approach in (a) and (b) in restating the deferred tax items in the opening statement of financial position of any comparative periods presented in the restated financial statements for the reporting period in which the entity applies
.
[
Refer:
Basis for Conclusions paragraphs BC18–BC25
]
5
After an entity has restated its financial statements, all corresponding figures
[
Refer:
IAS 29 paragraph 34
]
in the financial statements for a subsequent reporting period, including deferred tax items, are restated by applying the change in the measuring unit for that subsequent reporting period only to the restated financial statements for the previous reporting period.
[
Refer:
Basis for Conclusions paragraph BC25
Illustrative Example
]
Effective date
6
An entity shall apply this Interpretation for annual periods beginning on or after 1 March 2006. Earlier application is encouraged. If an entity applies this Interpretation to financial statements for a period beginning before 1 March 2006, it shall disclose that fact.
Footnotes
1
The identification of hyperinflation is based on the entity’s judgement of the criteria in
paragraph 3 of IAS 29
.
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