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Financial Reporting in Hyperinflationary Economies

Ind AS - 029 - Rules - B. Indian Accounting Standards (Ind AS) - Companies (Indian Accounting Standards) Rules, 2015 - Ind AS - 029 - Indian Accounting Standard (Ind AS) 29 (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles.) Scope 1 This Standard shall be applied to the financial statements, including the consolidated financial statements, of any entity whose functional currency i .....

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er 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 monetar .....

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at report in the currency of the same hyperinflationary economy apply this Standard from the same date. Nevertheless, this Standard applies to the financial statements of any entity from the beginning of the reporting period in which it identifies the existence of hyperinflation in the country in whose currency it reports. The restatement of financial statements 5 Prices change over time as the result of various specific or general political, economic and social forces. Specific forces such as c .....

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ets or liabilities. The exceptions to this are those assets and liabilities that the entity is required, or chooses, to measure at fair value. For example, property, plant and equipment may be revalued to fair value and biological assets are generally required to be measured at fair value. Some entities, however, present financial statements that are based on a current cost approach that reflects the effects of changes in the specific prices of assets held. 7 In a hyperinflationary economy, fina .....

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tation of the financial statements before restatement is discouraged. 8 The financial statements of an entity whose functional currency is the currency of a hyperinflationary economy, whether they are based on a historical cost approach or a current cost approach, shall be stated in terms of the measuring unit current at the end of the reporting period. The corresponding figures for the previous period required by Ind AS 1, Presentation of Financial Statements, and any information in respect of .....

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ation of certain procedures as well as judgement. The consistent application of these procedures and judgements from period to period is more important than the precise accuracy of the resulting amounts included in the restated financial statements. Historical cost financial statements Balance sheet 11 Balance sheet amounts not already expressed in terms of the measuring unit current at the end of the reporting period are restated by applying a general price index. 12 Monetary items are not rest .....

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4 All other assets and liabilities are non-monetary. Some non-monetary items are carried at amounts current at the end of the reporting period, such as net realisable value and fair value, so they are not restated. All other nonmonetary assets and liabilities are restated. 15 Most non-monetary items are carried at cost or cost less depreciation; hence they are expressed at amounts current at their date of acquisition. The restated cost, or cost less depreciation, of each item is determined by ap .....

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records of the acquisition dates of items of property, plant and equipment may not be available or capable of estimation. In these rare circumstances, it may be necessary, in the first period of application of this Standard, to use an independent professional assessment of the value of the items as the basis for their restatement. 17 A general price index may not be available for the periods for which the restatement of property, plant and equipment is required by this Standard. In these circums .....

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of a non-monetary item is reduced, in accordance with appropriate Ind ASs, when it exceeds its recoverable amount. For example, restated amounts of property, plant and equipment, goodwill, patents and trademarks are reduced to recoverable amount and restated amounts of inventories are reduced to net realisable value. 20 An investee that is accounted for under the equity method may report in the currency of a hyperinflationary economy. The balance sheet and statement of profit and loss of such a .....

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ation during the same period. This part of the borrowing costs is recognised as an expense in the period in which the costs are incurred. 22 An entity may acquire assets under an arrangement that permits it to defer payment without incurring an explicit interest charge. Where it is impracticable to impute the amount of interest, such assets are restated from the payment date and not the date of purchase. 23 [Refer Appendix 1] 24 At the beginning of the first period of application of this Standar .....

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rice index from the beginning of the period or the date of contribution, if later. The movements for the period in owners equity are disclosed in accordance with Ind AS 1. Statement of profit and loss 26 This Standard requires that all items in the statement of profit and loss are expressed in terms of the measuring unit current at the end of the reporting period. Therefore all amounts need to be restated by applying the change in the general price index from the dates when the items of income a .....

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statement of non-monetary assets, owners equity and items in the statement of profit and loss and the adjustment of index linked assets and liabilities. The gain or loss may be estimated by applying the change in a general price index to the weighted average for the period of the difference between monetary assets and monetary liabilities. 28 The gain or loss on the net monetary position is included in profit or loss. The adjustment to those assets and liabilities linked by agreement to changes .....

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al statements Balance sheet 29 Items stated at current cost are not restated because they are already expressed in terms of the measuring unit current at the end of the reporting period. Other items in the balance sheet are restated in accordance with paragraphs 11 to 25. Statement of profit and loss 30 The current cost statement of profit and loss, before restatement, generally reports costs current at the time at which the underlying transactions or events occurred. Cost of sales and depreciat .....

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this Standard may give rise to differences between the carrying amount of individual assets and liabilities in the balance sheet and their tax bases. These differences are accounted for in accordance with Ind AS 12, Income Taxes. Statement of cash flows 33 This Standard requires that all items in the statement of cash flows are expressed in terms of the measuring unit current at the end of the reporting period. Corresponding figures 34 Corresponding figures for the previous reporting period, whe .....

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paragraphs 42(b) and 43 of Ind AS 21 apply. Consolidated financial statements 35 A parent that reports in the currency of a hyperinflationary economy may have subsidiaries that also report in the currencies of hyperinflationary economies. The financial statements of any such subsidiary need to be restated by applying a general price index of the country in whose currency it reports before they are included in the consolidated financial statements issued by its parent. Where such a subsidiary is .....

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se of the general price index 37 The restatement of financial statements in accordance with this Standard requires the use of a general price index that reflects changes in general purchasing power. It is preferable that all entities that report in the currency of the same economy use the same index. Economies ceasing to be hyperinflationary 38 When an economy ceases to be hyperinflationary and an entity discontinues the preparation and presentation of financial statements prepared in accordance .....

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easuring unit current at the end of the reporting period; (b) whether the financial statements are based on a historical cost approach or a current cost approach; and (c) the identity and level of the price index at the end of the reporting period and the movement in the index during the current and the previous reporting period. (d) the duration of the hyperinflationary situation existing in the economy. 40 The disclosures required by this Standard are needed to make clear the basis of dealing .....

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, when that economy was not hyperinflationary in the prior period, and the entity therefore restates its financial statements in accordance with Ind AS 29. Issues 2 The questions addressed in this Appendix 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 Ind AS 29 be interpreted when an entity applies the Standard? (b) how should an entity account for opening deferred tax items in its restated financia .....

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al 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 balance sheet 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. 4 At the end of the .....

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