AASB 129 - Financial Reporting in Hyperinflationary Economies - August 2015

What this legislation does:

This is an accounting standard (AASB 129) that tells Australian businesses and organisations how to prepare their financial statements when they operate in a country experiencing hyperinflation — extreme, rapid price rises where money loses value quickly.

Who it affects:

• Australian entities (companies, trusts, not-for-profits) whose main operating currency is from a hyperinflationary economy (think Venezuela, Zimbabwe, or historically Argentina).
• Investors and lenders who need to understand financial reports from these entities.
• Auditors and accountants preparing or reviewing these statements.

Why it matters:

When inflation is extreme, normal financial reports become meaningless. A profit of $1 million might actually represent a loss in real purchasing power if prices doubled during the year. This standard forces entities to restate (adjust) their financial figures to reflect current values, using a general price index (a measure of overall inflation).

Key requirements:

• Restate everything — Assets, liabilities, income, and expenses must be adjusted to show their value at the end of the reporting period, not when they were originally recorded.