HYPERINFLATION

does not establish

PAS 29 on financial reporting in a hyperinflationary economy _________ an absolute rate at which hyperinflation is deemed to rise.

a matter of judgement

Hyperinflation is…

nonmonetary assets or in relatively stable foreign currency

[INDICATOR] The general population prefers to keep its wealth in _____________________.

a relatively stable foreign currency

[INDICATOR] The general population regards monetary amounts not in terms of local currency but in terms of _________________.

price index

Interest rates, wages and prices are linked to a ____________

over 3 years, 100%

[INDICATORS] The cumulative rate _______ is approaching or exceeds ____.

judgment may be used

Although PAS 29 sets out the characteristics that may indicate hyperinflationary economy, it also states that ______________ in determining whether restatement of financial statements is required.

PAS 29, paragraph 8

provides that the financial statements of an entity that reports in the currency of a hyperinflationary economy, whether they are based on historical cost approach or a current cost aproach, shall be stated in terms of the measuring unit current at the end of the reporting period.

NOT PERMITTED

Presentation of the information required under PAS 29 as a supplement to the unrestated financial statement is _____________.

constant peso accounting and current peso accounting

The restatement of financial statements of an entity that reports in the currency of a hyperinflationary economy is accomplish by means of __________________ and ___________________.

the restatement of conventional or historical financial statements in terms of the current purchasing power of the peso through the use of the index number

Constant peso accounting

purchasing power or price level accounting

Constant peso accounting is also known as _______ or ________

it defines monetary items as money held and assets and liability to be received or paid in fixed of determinable amount of money.

What does PAS 21 define?

the right to receive or an obligation to deliver a fixed or determinable amount of money

What is the essential feature of a monetary item?

the change in the general price level

Monetary assets and liabilities remain the same regardless of the change in the general price level

cannot be classified as monetary

Nonmonetary items may be defined as those items that _____________.

the absence of a right to receive or an obligation to deliver a fixed or determinable amount of money

The essential feature of a nonmonetary item?

Nonmonetary —> RESTATED

Monetary —> NOT RESTATED; they are automatically stated in terms of current purchasing power of the peso

What items are restated?

to report elements of the financial statements in terms of pesos that have the same purchasing power

what is the objective of constant peso accounting?

formula for restatement

general price index

the index number used for restatement is known as _________, constructed by the Bangko Sentral ng Pilipinas

how much overall level of prices in the economy changed over time

what does the general price index is designed to show?

purchasing power of money has decreased; popularly known as inflation

what does an increase in the general price index mean?

deflation

A decrease in the general price index

specific price index

the change in the price of a specific good or service, such as food, clothing and car

at a different or even opposite direction from the general price change in the overall economy

The specific price of a good or service may change at a….

purchasing power

the goods and services that money can buy

nonmonetary or monetary items