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Section 31 – Introduction
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Section 31 – Analysis
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- Section 1
- Section 2
- Section 3
- Section 4
- Section 5
- Section 6
- Section 7
- Section 8
- Section 9
- Section 10
- Section 11
- Section 12
- Section 13
- Section 14
- Section 15
- Section 16
- Section 17
- Section 18
- Section 19
- Section 20
- Section 21
- Section 22
- Section 23
- Section 24
- Section 25
- Section 26
- Section 27
- Section 28
- Section 29
- Section 30
- Section 31
- Section 32
- Section 33
- Section 34
- Section 35
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- Section 1
- Section 2
- Section 3
- Section 4
- Section 5
- Section 6
- Section 7
- Section 8
- Section 9
- Section 10
- Section 11
- Section 12
- Section 13
- Section 14
- Section 15
- Section 16
- Section 17
- Section 18
- Section 19
- Section 20
- Section 21
- Section 22
- Section 23
- Section 24
- Section 25
- Section 26
- Section 27
- Section 28
- Section 29
- Section 30
- Section 31
- Section 32
- Section 33
- Section 34
- Section 35
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Section Downloads
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Contents
31.2 Hyperinflationary economy.
31.2.1 Extract from FRS102: Section 31.2 – 31.14.
31.2.2.1 Indicators of hyper inflation.
31.2.2.2 Examples of monetary items.
31.2.2.3 Examples of non-monetary items.
31.2.2.4 The rules where a hyper inflationary economy is identified.
31.2.2.4.1 General price index.
31.2.2.4.2 Retranslation of non-monetary assets of statement of financial position.
31.2.2.4.2.1 Example conversion for non-monetary items on the balance sheet.
31.2.2.4.3 Shareholders equity.
31.2.2.4.5 Restatement of income statement.
31.2.2.4.7 Illustration of the accounting requirements in Sections 31.1 to 31.12 of FRS 102.
31.2.2.4.8 Procedures required to calculate the net monetary gain/loss as required by Section 31.13.
31.3.1 Extract from FRS102: Section 31.15.
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Section 31 Hyperinflation Quick Guide (PDF) (45 downloads )
Summary
This section applies to an entity whose functional currency is the currency of a hyperinflation economy. It details with the adjustments required to exclude the effects of hyperinflation.
What is new?
Old GAAP reporters (non FRS 26 reporters hence using UITF 9) refers to similar criteria to Section 31 for determining when an economy is hyperinflationary, but adds a requirement that an economy will automatically be classified as hyperinflationary if the cumulative inflation rate over three years is approaching or exceeds 100%. Section 31 does not state this.
What is different?
Old GAAP allowed two choices for retranslating, one of which is the same as that detailed in Section 31 and the other is not allowed in Section 31, that being that an entity may choose to use a relatively stable currency as its functional currency (so transactions are recorded from the outset in the stable currency rather than the local currency).
What are the key points?
Both the current year and comparative results are reported based on the measuring unit current at the end of the period.
To achieve this, balance sheet monetary items are not restated; non-monetary items are restated by applying a general price index, unless already stated at fair value or net realisable value.
All amounts in the profit or loss in the current and comparative periods are restated based on the change in the general price index from the point the transaction was first recorded to the reporting date. The gain or loss on the net monetary position is included in the profit or loss.
What do accountants need to do?
Be aware of the differences between old GAAP and Section 31.
Review the client portfolio to assess if any clients are currently impacted with foreign operations in a hyperinflationary economy.
What do Companies need to do?
Be aware of the differences between old GAAP and Section 31 and assess whether these affect the entity.
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Examples
Example 1: Conversion non-monetary items balance sheet.
Example 2: Conversion income statement.
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Website Links
Procedures Required to Calculate the Net Monetary Gain, Loss
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Difference Guide – Hyperinflation
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