‘ “IAS 29 is not required during hyperinflation when an entity implements CMUCPP because this model is not a HCA model and only HC or CC financial statements are restated as required in IAS 29.” ‘
Communication from the IASB, 2013
The issue treated in the above statement is not to be added to IFRS as an IFRIC or an addition to IAS 29 because “the issue is not widespread” as stated by the IASB in a teleconference in December 2012 and again in a second teleconference on 8 January 2013.
We are all very thankful that hyperinflation is not widespread in the world economy. That does not mean that we should be satisfied with the fact that the failed IAS 29 has no effect during hyperinflation as fully proven during the 8 years that it was implemented in Zimbabwe´s hyperinflation with no effect – in the way the IASB indicated that the Board is satisfied with the fact that IAS 29 had no effect in Zimbabwe, that nothing needs to be done about it and that it would most probably be maintained in the future replacement of IAS 29: implementing the failed IAS 29 model even at lower levels of inflation as proposed by the Argentinean Accounting Federation.
It is correct to depart from Historical Cost Accounting at 10% annual inflation and at 26% cumulative high inflation over three years instead of only at hyperinflation of 100% cumulative inflation over three years as required in IAS 29, but not maintaining the failed IAS 29 model since the failed IAS 29 model is “an extension to, not a departure from historical cost accounting” as correctly stated by PricewaterhouseCoopers. The implementation of IAS 29 had no effect during 8 years of implementation in the Zimbabwe economy.
Although the IASB stated that the above issue would not be included in IFRS because it is not “wide spread”, the future replacement of IAS 29, which deals with financial reporting during hyperinflation – an economic environment which falls in the same not “wide spread” category – is nevertheless being submitted to research by the IASB.
The IASB thus, luckily, does not have a consistent basis for deciding what to deal with and what not to deal with in IFRS. The above two issues deal with the same topic.
Copyright (c) 2005-2012 Nicolaas J Smith. All rights reserved. No reproduction without permission.