Unit 7: Hyperinflation Flashcards
(T/F). PAS 29 does not establish an absolute rate at which hyperinflation is deemed to arise. Even moreso, hyperinflation is only a matter of judgement.
True.
Which of the following situations is/are indicators of hyperinflation?
A) Sales on purchases on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even if said period is short.
B) Interest rates, wages and prices are linked to a price index.
C) The general population regards monetary amounts not in terms of local currency but in terms of a relatively stable foreign currency.
All of the above.
(T/F). According to IAS 29, the reports of an entity in a hyperinflationary economy shall be stated in terms of the measuring unit current at the end of the reporting period–regardless of whether they are based on a historical or current-cost approach.
True.
______, also known as purchasing power of price level accounting, is the restatement of conventional or historical FS in terms of the current purchasing power of the peso through the use of an index number.
Constant peso accounting.
The traditional concept of preparing FS based on historical cost is known as _____ ______ accounting.
Nominal peso accounting.
(T/F). IAS 29 defines monetary items as money held and assets and liabilities to be received/paid in fixed or determinable amount of money.
False; IAS 21.
(T/F). Monetary assets and liabilities remain the same regardless of the change in the general price level.
True.
_____ are called as such items because their peso amounts reported in the FS differ from the amounts that are ultimately realizable or payable.
Nonmonetary items.
Only ______ items are restated when preparing constant peso financial statements.
Nonmonetary items.
A ______ is recognized if net monetary assets at historical cost exceed the net monetary assets at current pesos.
A gain on purchasing power.
(T/F). The specific price of a good or service may change at a different rate and even in the opposite direction from the general price change.
True.
The index number used for restatement is known as ________ and is constructed by the BSP.
General price index.
(T/F). An increase in the general price index means that the purchasing power of money has decreased, also known as inflation.
True.
The objective of _________ is to report FS elements in terms of pesos that have the same purchasing power.
Constant peso accounting.
(T/F). The nature and level of the price ndex at the EORP and the movement in the index during the current and previous period must be disclosed when under hyperinflation.
True.
(T/F). The criterion for an economy ceasing to be hyperinflationary is when its cumulative inflation rate drops below 50% in a three-year period.
False; drops below 100%.
(Monetary/Nonmonetary):
Advances to employees
Monetary.
(Monetary/Nonmonetary):
Prepaid insurance, taxes, advertising, rent
Nonmonetary.
(Monetary/Nonmonetary):
Advances to suppliers
Nonmonetary.
(Monetary/Nonmonetary):
Discount on bonds payable
Monetary.
(Monetary/Nonmonetary):
Accrued expenses
Monetary.
(Monetary/Nonmonetary):
Advances from customers
Nonmonetary.
(T/F). When prices increase, it is more advantageous to incur fixed obligations rather than hold monetary assets.
True.
(Monetary/Nonmonetary):
Intangible assets
Nonmonetary
