New UK GAAP 2015: Application of FRS 100-102 in the UK

Chapter 26 Hyperinflation

1 Introduction

   1.1 The concept of hyperinflation

   1.2 Relevance in the UK

2 Comparison between Section 31, previous UK GAAP and IFRS

   2.1 Key differences to previous UK GAAP

   2.2 Key differences to IFRS

3 Requirements of Section 31 for hyperinflation

   3.1 Terms used in Section 31

   3.2 A hyperinflationary economy

   3.3 Measuring unit in the financial statements

   3.4 Procedures for restating historical cost financial statements

       3.4.1 Statement of financial position

       3.4.2 Statement of comprehensive income and income statement

       3.4.3 Statement of cash flows

       3.4.4 Gain or loss on net monetary position

       3.4.5 Economies ceasing to be hyperinflationary

   3.5 Disclosures

Chapter 26 Hyperinflation

1 Introduction

1.1 The concept of hyperinflation

Accounting standards are applied on the assumption that the value of money (the unit of measurement) is constant over time, which normally is an acceptable practical assumption. However, when the effect of inflation on the value of money is no longer negligible, the usefulness of historical cost based financial reporting is often significantly reduced. High rates of inflation give rise to a number of problems for entities that prepare their financial statements on a historical cost basis, for example:

• historical cost figures expressed in terms of monetary units do not show the value to the business of assets;
• holding gains on non-monetary assets that are reported ...