- PAS 29 does not establish an absolute rate for Increase in general price index, decrease

hyperinflation Inflation in purchasing power of money

- A matter of judgment HYPERINFLATION
- Economy ceasing to be hyperinflationary – amounts in the (PAS 29) Decrease in general price index, Increase
Deflation
measuring unit current shall be CA in subsequent FS in purchasing power of money

-The fact that the FS have been restated

Disclosures -Whether current cost or historical cost is used
GENERAL CHARACTERISTICS RESTATEMENT METHODS -Nature and level of price index at year-end & movement

It is indicated by, but not limited,

Restatement of conventional
of the ff:
FS in terms of current
1. The general population keeps CONSTANT PESO ACCOUNTING purchasing power through the CURRENT PESO ACCOUNTING
its wealth in nonmonetary assets use of index number
Classify monetary and non-
or in relatively stable foreign -Method of measuring assets, liabilities, income &
monetary items
currency expenses at current cost at end of reporting period
2.Regards monetary amounts not Monetary items are money held, assets -Restatement of historical cost in terms of replacement
it local currency but in terms of and liabilities to be received or paid in cost
determinable amount of money
relatively stable foreign currency
Holding gain or loss
3.Sales & purchases on credit Nonmonetary items are restated Realized holding gain (loss) = net current cost –
take place at prices that Using this formula: historical cost of assets sold or used during the year
compensate for the expected Index number at end of reporting period x Historical cost Unrealized holding gain (loss) = net current cost –
loss of purchasing power during Index number on acquisition date
historical cost of the assets on hand or unsold at the
credit period All income statement items are end of the year
4.Interest rates, wages, and prices restated
are linked to a price index
Using this formula: ITEMS FOR RESTATEMENT
5.The cumulative rate over 3 Index number at end of reporting period x Historical cost
years is approaching or exceeds Average index
100% Cost of goods sold
Gain or loss in purchasing power
Average unit cost x units sold during the
NOTES: For monetary assets to be reported on P/L: period
Purchasing power – is affected by Net mon. asset cost – Net mon. asset restated = Gain (loss)
general price index and specific price Net mon. liab cost – Net mon. liab. Restated = (Gain) Loss Depreciation expense
index Average cost of historical & replacement
General price index – constructed by Effect on other accounts Useful life
BSP to show how much the overall level Revaluation surplus- eliminated Inventories
of prices in the economy has changed Retained earnings – balancing figure in SoFP
over time Unsold units x current replacement cost
Specific price index – change in the Comparative statements Property, plant & equipment
price of a specific good or service
The monetary items of the preceding year Replacement cost – Depreciation (RC/
(due to supply & demand)
are expressed in terms of the index number Useful life = Net restated amount
Monetary items are not restated bec.
at the end of the current year
they are already expressed in current
monetary unit

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