IASB redeliberates proposed amendments to IAS 21

Project direction 

The IASB tentatively decided not to include the topic in a broader project on hyperinflation.  

Proposed translation method  

The IASB tentatively decided that an entity should translate the amounts subject to translation, including those for comparative periods, using the closing rate at the date of the most recent statement of financial position, if:  

• the entity’s functional currency is the currency of a non-hyperinflationary economy, and the entity presents its financial statements in the currency of a hyperinflationary economy; or  
• the entity’s presentation currency is the currency of a hyperinflationary economy, and the entity translates the results and financial position of a foreign operation whose functional currency is the currency of a non-hyperinflationary economy.  

The IASB also tentatively decided to introduce an exception for entities falling into the second category if they have a hyperinflationary functional currency and apply IAS 29 – Financial Reporting in Hyperinflationary Economies. These entities should restate comparative information for a foreign operation using the same general price index as they apply to other amounts, in accordance with IAS 29.  

Disclosure requirements and other aspects of the project  

The IASB tentatively decided that:  

• an entity using the proposed translation method would be required to disclose that:  
  • all the amounts in its financial statements, or the results and financial position of its foreign operations, have been translated at the closing rate at the date of the most recent statement of financial position; and  
  • its presentation currency has ceased to be the currency of a hyperinflationary economy (if applicable);  
• an entity would be required to provide summarised financial information about the foreign operations to which this translation method has been applied;  
• an entity that applies the exception above would be required to label the summarised financial information about its foreign operations in order to make clear that this information has been prepared by applying the same general price index as that applied to other amounts; and  
• an entity whose presentation currency ceases to be hyperinflationary would be required to apply paragraph 39 of IAS 21 – The Effects of Changes in Foreign Exchange Rates prospectively to amounts resulting from transactions after the end of the previous reporting period.  

At future meetings, the IASB will consider the disclosure requirements for subsidiaries that apply IFRS 19 – Subsidiaries without Public Accountability: Disclosures, as well as the transition requirements and effective date for the amendments discussed.