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IPSAS Explained: A Summary of International Public Sector Accounting Standards, 2nd Edition by Thomas Muller-Marques Berger

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IPSAS 10: Financial Reporting in Hyperinflationary Economies

Objective

IPSAS 10 governs financial statements of public sector entities whose functional currency is the currency of a hyperinflationary economy. In a hyperinflationary economy, financial reporting in the local currency without restatement is not useful. Money loses purchasing power at such a rate that comparison of amounts from transactions and other events that have occurred at different times, even within the same reporting period, is misleading.

The IFRS on which the IPSAS is based

IAS 29, Financial Reporting in Hyperinflationary Economies

Content

Principal definitions

Functional currency is the currency of the primary economic environment in which the entity operates. The primary economic environment of an entity is normally the one in which it primarily generates and expends cash (cf. IPSAS 4.11).

Presentation currency is the currency in which the financial statements are presented (cf. IPSAS 4.10).

Monetary items are units of currency held and assets and liabilities to be received or paid in fixed or determinable number of units of currency (cf. IPSAS 4.10).

Application

IPSAS 10 applies to the primary financial statements, including the consolidated financial statements, of any entity whose functional currency is the currency of a hyperinflationary economy.

IPSAS 10 does not establish an absolute rate at which hyperinflation is deemed to exist. When restatement of financial statements in accordance with this ...

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