So we know that under IFRS, whe hyperinflation exists, restate the statements adjusting for inflation, then use current rate method. How much detail have you guys learned on this process? I know the basics, but would not be able to calculate the amount of a purchasing power G/L. I noticed the LOS just says to analyze the effect, not calculate.
Just curious as to how much everyone worked on this.
Only a little bit. Please anybody correct me if I am wrong.
But since IFRS restates the non monetary assets for inflation, the net monetary position is used to calculate purchasing power G/L as you would with the temporal method. I believe I saw a question regarding this in one of the Schweser mocks.
I would actually just like to clarify (because I feel like I’ve seen conflicting info): if there is hyperinflation under FASB you should use the temporal method. Is this correct?
Yes, with GAAP use temporal.
With IFRS, inflation adjust the non monetary assets (I believe its the non monetary assets) and then apply CR
Remember for it to be hyperinflation you need inflation 100% in 3 years or approximately 26% per year compounded. I’ve seen several mock examples where they said 20% compounded inflation, which is a lot, but isn’t considered hyperinflati on since it doesn’t meet the 26% per year mark as required by GAAP. I actually need to check to see if IFRS has a different cutoff/classification for a hyperinflationary environment.