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Wiley IFRS: Practical Implementation Guide and Workbook
Property, plant, and equipment
Inventory
Cash
Share capital (issued
20X
I)
Retained earnings
Noncurrent liabilities
Current liabilities
Practical Insight
Norilsk Nicket, a Ru ssi an entity , di scl osed in 2002 that the ec on omy of the Ru ssi an Federation
was con sid ered to be hyperinflation ary even though a rat e of inflation was not published .
Norilsk N icket showed a table of conve rs io n factors taken fro m the cons umer pri ce index . It
al so di sclosed that from 2003, the economy has ceased to be hyperinflationary and that it will
now measure its noncurrent as sets and liabilities at cost.
Case Study 1
Facts
An entity keeps three weeks' inventory of raw materials on hand and has a substantial amount of fin–
ished goods inventory. The entity operates in a hyperinflati onary environment.
Required
Advise the entity as to how to restate its inventory.
Solution
A general price index should be used, but the problem will be maintaining records of the acquisition
dates of the raw materials and the nature and timing of the conversion cost to finished inventory . Sys–
tems need to be developed to accumulate this information in order to use general price indices . If there
are low inventory levels, the problem is minimi zed. In this case, the general price indices for the most
recent month will be used together with the aged inventory lists to restate inventory.
6.2 The gain or loss on the net monetar y posit ion is included in net income.
7. SUNDRY POINTS
7.1 Current cost fi nancial statements.
The balance sheet is not restated, but the income sta teme nt
needs re stating into the measuring unit at the balance sheet date using a general pri ce index.
7.2 Taxation.
There may be deferred tax consequence s of the restatement of the carrying valu es
of assets and liabilities.
Case Study 2
Facts
Z operates in a hyperinfl ationary economy. Its balance sheet at December 31, 20X5, follows:
m. zlotis
900
2,700
350
400
2,350
500
700
The general price index had moved in this way:
December 31
20XI
100
20X2
130
20X3
150
20X4
240
20X5
300
The property, plant, and equipment was purchased on December 31, 20X3, and there is six months' in–
ventory held. The noncurrent liabilities were a loan raised on March 31, 20X5.
Required
Show the balance sheet of Z after adjusting for hyperinflation.