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Example 1: Conversion non-monetary items balance sheet
Company A purchased a piece of equipment in September 2014 for FC10,000. The year end is now the 31 December 2015. The general price index in that country and the conversion factors are as follows:
|
Year Ended |
General Price Index |
Conversion Factor |
|
31 December 2014 |
25 |
5.2 (130/25) |
|
31 December 2015 |
130 |
1(130/130) |
In this case the restated property plant and equipment is FC52,000 (FC10,000*5.2). The difference of FC42,000 is posted to the profit and loss account/retained earnings.
Example 2: Conversion income statement
Company A had sales of FC10,000 during February and FC10,000 sales in November 2015. No other sales were made in the year. The conversion factors are as per below and the year end general price index is 140:
|
Month |
General Price index |
Conversion Factor |
|
February 2015 |
25 |
5.6 (140/25) |
|
November 2015 |
130 |
1.076 (140/130) |
From the above the amount to be shown in revenue in the financial statements for the year is:
|
February Sales = FC10,000*5.6= |
FC56,000 |
|
November Sales= FC10,000*1.076= |
FC10,760 |
|
Total Revenue |
FC66,760 |
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