The effects of inflation in financial statements have for several years now been a cause for concern in those regions of the world where inflation is moderate or high. The concern arises from the distortion resulting from the lack of recognition of inflation.
The above concern has been discussed at international accounting meetings, including the IASB, ASAF, IFASS and GLASS.
The question to answer is whether the scope of IAS 29, Financial Reporting in Hyperinflationary Economies, should be widened to require the recognition of the effects of high inflation in the financial statements of entities and not wait until reaching hyperinflation, as IAS 29 currently requires. The IASB’s research pipeline includes a possible future project to assess whether such a scope extension would be feasible. That project would not consider amending any other requirements of IAS 29.
The standard-setting bodies in Argentina and Mexico have initiated an investigation to determine the current status of inflation accounting in different regions of the world and, in particular, to determine the needs of the users of financial information of entities that operate in inflationary economic environments. The responses received will provide evidence to the IASB on whether the scope of IAS 29 should be widened.
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