High Inflation

The International Accounting Standards Board carried out research to assess requests to:

• eliminate or reduce a cumulative inflation rate threshold currently included in IAS 29 to identify when hyperinflation exists; and
• modify the procedures for reporting the adjustments resulting from restating the financial statements.

Following feedback in the 2015 Agenda Consultation and a review of the research findings, the Board decided:

• to add to its research pipeline a new, narrow-scope feasibility study to consider the scope of IAS 29; and
• not to develop modifications to the procedures for reporting the adjustments resulting from restating the financial statements. 

Background

IAS 29 Financial Reporting in Hyperinflationary Economies sets out some characteristics of hyperinflation and contains requirements about the adjustments needed when an entity is subject to the effects of hyperinflation. The characteristics of hyperinflation in IAS 29 include an inflation rate threshold. This threshold suggests that hyperinflation occurs when the cumulative inflation rate over three years is approaching, or exceeds, one hundred per cent. 

The requests to review IAS 29 came from stakeholders who were concerned that the financial position and performance of entities can be distorted in countries subject to medium- or long-term high inflation levels if the financial statements are not adjusted for the effects of hyperinflation (that is, where the effects of inflation are significant). The requests related mainly to the Latin America region, but were also applicable to entities in other high-inflation countries.