HYPERINFLATION
PAS 29, paragraph 8
It provides that the financial statements of an entity that reports HYPERINFLATIONARY currency whether is is HISTORICAL or CURRENT cost approach SHALL be STATED in terms of measuring unit current @ end of reporting period
Monetary items
It refers to cash and assets that represent a fixed amount of pesos to be RECEIVED or obligations that represent a FIXED AMOUNT of pesos to be PAID
GENERAL PRICE INDEX by BSP
It shows how much the overall level of prices in the economy changed over time
Not RESTATED
Monetary items are...
Restated by applying the general price index from the date of acquisition to the end of reporting period.
Non-monetary items
Purchasing power or price level accounting
Other terms of Constant peso accounting
Hyperinflation
it is indicated by characteristics of economic environment of country
incur FIXED OBLIGATIONS rather than HOLD MONETARY ASSETS
When prices increase it is MORE ADVANTAGEOUS to___
Monetary items
It is defined in PAS 21 as MONEY held and ASSETS/LIABILITIES to be received or paid in FIXED or DETERMINABLE AMOUNT OF MONEY
Nominal Peso Accounting
It is the TRADITIONAL concept of preparing FS based on HISTORICAL cost
SPECIFIC PRICE INDEX
It is the change in the price of a specific good or service, such as food, clothing and car.
Constant peso accounting
It is the restatement of conventional or historical FS in terms of PESO PURCHASING POWER through INDEX NUMBER.
SPECIFIC PRICE CHANGE
It occurs primarily because of change in SUPPLY and DEMAND for a PARTICULAR good or service.
PPE
Carried at amount CURRENT AT DATE other than acqui date
Monetary items
General purchasing power gain or loss is computed ONLY to and it is INCLUDED IN profit or loss
GP It prefers to keeps its wealth in NON-MONETARY ASSETS or in relatively STABLE FOREIGN CURREN GP regards MONETARY AMOUNTS NOT IN TERMS OF LOCAL CURRENCY but in terms of RELATIVELY STABLE FOREIGN CURRENCY Sales and purchases on CREDIT takes place at prices that COMPENSATE for the EXPECTED LOSS of purchasing power during the credit period even if it is SHORT Interest rates, wages and prices are LINKED to a PRICE INDEX The cumulative rate over 3 years is approaching or EXCEEDS 100%
Hyperinflation includes the but not limited to the following :
DEFLATION or FALLING PRICES
In a period of ____ or ____, purchasing POWER GAIN is INCURRED on monetary assets and purchasing POWER LOSS is REALIZED on monetary liabilities
INFLATION or RISING PRICES
In a period of ____ or ____, purchasing POWER LOSS is INCURRED on monetary assets and purchasing POWER GAIN is REALIZED on monetary liabilities
PAS 29 ON FINANCIAL REPORTING IN A HYPERINFLATIONARY ECONOMY
It does not ESTABLISH an absolute rate at which HYPERINFLATION is deemed to arise
CONSTANT PESO ACCOUNTING
It has an objective to report ELEMENTS of the FS in terms of pesos that have the same purchasing power
Hyperinflation
It is a matter of JUDGMENT
Constant peso accounting and current cost accounting
It is a means to accomplish restatement of FS that reports in the CURRENCY OF HYPERINFLATIONARY ECONOMY
GENERAL PRICE INDEX by BSP
The index number used for restatement is called
1. Monetary 2. Nonmonetary
The items in the FS are classified into?
Non-Monetary items
Their PESO amounts reported in the FS DIFFER from the amounts that are ultimately REALIZABLE/PAYABLE
Index # at end of reporting period/index # at beg ate reporting period x Historical cost
WHAT IS THE FORMULA FOR RESTATEMENT
Presentation of the information required as a SUPPLEMENT to unrestated FS is NOT PERMITTED
What is not permitted under PAS 29
The ABSENCE OF RIGHT to receive or an obligation to DELIVER a fixed or determinable amount of money
What is the essential feature of a NON-monetary item?
The RIGHT to receive or an obligation to DELIVER a fixed or determinable amount of money
What is the essential feature of a monetary item?
only NONMONETARY ITEMS
What items are RESTATED?
purchasing power of money has INCREASED also called Deflation
decrease in the general price index means...
purchasing power of money has DECREASED also called INFLATION
increase in the general price index means...
Non-Monetary items
items that CANNOT be classified as MONETARY
Purchasing power
means the goods and services that MONEY CAN BUY
Property, Plant, and Equipment, GW & other intangible asset
the reSTATED amount of 1,2&3 is REDUCED when it EXCEEDS the RECOVERABLE amount
Eliminated
treatment for any revaluation surplus recognized previously