There is currently no specific guidance for translating a company’s financial statements from a non-hyperinflationary functional currency into a hyperinflationary presentation currency. This scenario arises when a company presents its financial statements in a hyperinflationary currency but has:
-
a non-hyperinflationary functional currency; or
-
a foreign operation with a non-hyperinflationary functional currency.
To reduce diversity in practice and improve the usefulness of information for investors, the International Accounting Standards Board (IASB) proposes to amend IAS 21 The Effects of Changes in Foreign Exchange Rates to clarify that a company uses the closing rate when translating all the financial statement amounts (including comparatives) into its presentation currency in these circumstances.