Use of a Hyperinflationary Presentation Currency by a Non-hyperinflationary Entity (IAS 21)—Disclosure requirements for subsidiaries without public accountability and due process requirements (Agenda Paper 12)

At its December 2023 meeting, the IASB tentatively decided to propose narrow-scope amendments to IAS 21. The proposed amendments would introduce a new translation method for presenting the financial information of a non-hyperinflationary entity in a hyperinflationary presentation currency that would improve the usefulness and comparability of the reported financial information.

In its February 2023 meeting, the IASB tentatively decided to propose adding some disclosure requirements to complement the proposed new translation mechanism.

The purpose of this session was to discuss whether and to what extent those proposed disclosures requirements should apply to subsidiaries without public accountability and to ask the IASB for permission to begin the process for balloting the exposure draft proposing these amendments.

Staff recommendations

The staff recommended:

• An eligible subsidiary within the scope of the proposed amendments should be required to disclose the fact that the entity’s financial statements (or results and financial position of the eligible subsidiary’s foreign operation) and corresponding figures for previous periods have been translated at the closing rate at the date of the most recent statement of financial position. (Recommendation 1)
• An eligible subsidiary whose presentation currency ceases to be hyperinflationary should be required to disclose that fact. (Recommendation 2)
• An eligible subsidiary that translates the results and financial position of a foreign operation that has a non-hyperinflationary functional currency into a hyperinflationary presentation currency should be required to disclose summarised financial information about the results and financial position of that foreign operation. (Recommendation 3)

IASB discussion

IASB members did not have any comments on Recommendations 1 and 2. There was some discussion on Recommendation 3, in particular on whether aggregation should be allowed. One IASB member suggested to propose that it be allowed and evaluate the feedback received on this in response to the ED. Another IASB member agreed and stressed that groups in hyperinflationary jurisdictions will have many hyperinflationary subsidiaries and therefore it would be onerous if they had to present the information on an individual subsidiary basis. Others disagreed and thought that individual information was beneficial to investors.

IASB decision

All IASB members agreed with Recommendations 1 and 2.

13 of the 14 IASB members agreed with Recommendation 3.

All IASB members agreed with a comment period of 120 days and gave permission to start the balloting process.

No IASB member signalled intention to dissent from the proposals.