An entity that operates in a hyperinflationary economy is required under IAS 29 to restate all non-monetary items in its balance sheet to the measuring unit current at end of the reporting period by applying a general price index. The simplified example above already raises a number of questions, such as: Which balance sheet items are monetary and which are non-monetary? How does the entity […]

Asset group [IFRS 13.IE3-6] An entity acquires assets and assumes liabilities in a business combination. One of the groups of assets acquired comprises Assets A, B and C. Asset C is billing software integral to the business developed by the acquired entity for its own use in conjunction with Assets A and B (i.e. the related assets). The entity measures the fair value of each […]

Restatement of property, plant and equipment The table below illustrates how the restatement of a non-monetary item (for example, property, plant and equipment) would be calculated in accordance with the requirements of IAS 29. The calculations described under (a)-(e) all require estimates regarding the general price index at given dates and are sometimes based on averages or best estimates of the actual date of the […]

Estimating a market rate of return when there is a significant decrease in volume or level of activity [IFRS 13.IE49-58] Entity A invests in a junior AAA-rated tranche of a residential mortgage-backed security on 1 January 20X8 (the issue date of the security). The junior tranche is the third most senior of a total of seven tranches. The underlying collateral for the residential mortgage-backed security […]

Restatement of equity The table below shows the effect of a hypothetical IAS 29 restatement on individual components of equity. Issued share capital and share premium increase by applying the general price index, the revaluation reserve is eliminated as required, and retained earnings is the balancing figure derived from all other amounts in the restated balance sheet. A user of the financial statements of the […]

Transportation costs Entity A holds a physical commodity measured at fair value in its warehouse in Europe. For this commodity, the London exchange is determined to be the principal market as it represents the market with the greatest volume and level of activity for the asset that the entity can reasonably access. The exchange price for the asset is CU25. However, the contracts traded on […]

Restatement of historical cost income statement An entity would restate its revenue for the period ending 31 December 2013, when the general price index was 2,880, as shown in the table below. A similar calculation can be made for other items in statements of comprehensive income (and income statements if presented). Inevitably, in practice there is some approximation because of the assumptions that the entity […]

Highest and best use vs. current use [IFRS 13.IE7-8] An entity acquires land in a business combination. The land is currently developed for industrial use as a site for a factory. The current use of the land is presumed to be its highest and best use unless market or other factors suggest a different use. Nearby sites have recently been developed for residential use as […]

Highest and best use vs. intended use [IFRS 13.IE9] An entity acquires a research and development (R&D) project in a business combination. The entity does not intend to complete the project. If completed, the project would compete with one of its own projects (to provide the next generation of the entity”s commercialised technology). Instead, the entity intends to hold (i.e. lock up) the project to […]

Consistent assumptions about highest and best use in an asset group A wine producer owns and manages a vineyard and produces its own wine onsite. The vines are measured at fair value less costs to sell in accordance with IAS 41 at the end of each reporting period. The grapes are measured at the point of harvest at fair value less costs to sell in […]