IAS 15
Withdrawn
Information Reflecting the Effects of Changing Prices
The IASC's most fully developed response to general price-level changes, offering guidance on both current cost accounting (CCA) and current purchasing power (CPP) approaches. Withdrawn in 2003 as global inflation stabilised. For current price-level guidance, IAS 29 addresses only hyperinflationary economies.
Withdrawn Standard
IAS 15 (issued 1981) was the IASC's most fully developed response to general price-level changes, offering guidance on both current cost accounting (CCA) and current purchasing power (CPP) approaches. Compliance was made voluntary in 1989, and the standard was formally withdrawn in 2003 as global inflation stabilised.
It is retained here purely for historical reference – for current price-level guidance, IAS 29 addresses only hyperinflationary economies specifically.
Current Standard
IAS 29 Financial Reporting in Hyperinflationary Economies 1
Conceptual Framework Linkage
A far more developed attempt than its predecessor, IAS 6
Where IAS 6 merely surveyed possible approaches without prescribing detailed mechanics, IAS 15 went considerably further – providing a genuinely worked-out current cost accounting model, including specific adjustments for depreciation, cost of sales, monetary working capital, and gearing, designed to isolate the real operating profit an entity earned after maintaining its productive capacity, distinct from mere holding gains caused by inflation.
HOW IAS 15 MAPPED TO THE FRAMEWORK
Faithful representation – the CCA model aimed to separate genuine operating performance from illusory "profit" that merely reflected inflation-driven holding gains on inventory and fixed assets Capital maintenance – IAS 15's adjustments directly embodied the Framework's physical capital maintenance concept, requiring sufficient profit to be retained to replace assets at their higher current cost before any true profit was recognised Complexity as a genuine barrier – the four specific adjustments (depreciation, COGS, monetary working capital, gearing) made IAS 15 considerably more complex to apply than IAS 6's mere encouragement, ultimately becoming a burden that outweighed its benefits once inflation moderated
IAS 15 represents the IASC's most ambitious attempt to formalise inflation-adjusted accounting – a level of technical sophistication never achieved before or since in mainstream IFRS, reflecting how seriously the 1970s-80s inflation crisis was taken by standard-setters at the time.
The four current cost adjustments, at a glance
AdjustmentPurpose
Depreciation adjustmentReflects current replacement cost of fixed assets, not historical cost
Cost of sales adjustment (COSA)Removes inventory holding gains from reported operating profit
Monetary working capital adjustment (MWCA)Reflects the additional funding needed for working capital at current prices
Gearing adjustmentRecognises that debt holders (not equity) bear the burden of financing inflation-driven capital needs
These four adjustments together aimed to isolate a "true" current cost operating profit – a genuinely sophisticated (if ultimately short-lived) accounting exercise.
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Scope & Applicability (Historical)
What IAS 15 covered
IAS 15 applied to entities wishing to present information reflecting the effects of changing prices – initially encouraged broadly, though compliance was made explicitly voluntary from 1989 onward, following widespread international disagreement about the mandatory application of inflation accounting.
This shift from encouraged toward explicitly voluntary status in 1989 foreshadowed the standard's eventual complete withdrawal in 2003.
Key definitions you must know (historical)
Current cost operating profit
Historical cost operating profit, adjusted for depreciation, cost of sales, and monetary working capital, to reflect the maintenance of the entity's operating capability at current prices.
Holding gain
The increase in the replacement cost of an asset (e.g. inventory) held during a period, arising purely from price changes rather than genuine operating activity.
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The Current Cost Accounting (CCA) Model (with worked example)
Restating specific assets at current replacement cost
Under CCA, specific assets (inventory, PPE) were restated to their current replacement cost, with the resulting adjustments flowing through a specifically structured current cost profit and loss statement, isolating operating profit from holding gains.
Example 1: Isolating a holding gain from operating profit
A retailer sells inventory for $150,000 that was purchased for $100,000 (historical cost). At the time of sale, the current replacement cost of that same inventory was $115,000.
Historical cost profit = 150,000 − 100,000 = $50,000
Current cost operating profit (after the COSA) = 150,000 − 115,000 = $35,000 (the true operating margin)
Holding gain (excluded from operating profit) = 115,000 − 100,000 = $15,000 – reflecting pure inflation, not genuine trading performance
Current cost operating profit (after the COSA) = 150,000 − 115,000 = $35,000 (the true operating margin)
Holding gain (excluded from operating profit) = 115,000 − 100,000 = $15,000 – reflecting pure inflation, not genuine trading performance
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Current Cost Adjustments – Depreciation & COGS
Two of the four core adjustments
The depreciation adjustment increased the depreciation charge to reflect the asset's current replacement cost rather than its original historical cost – ensuring the charge genuinely reflected the cost of maintaining productive capacity. The cost of sales adjustment (COSA) removed inventory holding gains from operating profit, as illustrated in Example 1 above – together, these two adjustments addressed the most significant sources of historical cost distortion in most businesses.
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Monetary Working Capital Adjustment (MWCA)
Recognising the additional funding burden of inflation
The MWCA recognised that, as prices rose, an entity needed more monetary working capital (net trade receivables less payables) simply to maintain the same volume of business – this additional funding requirement was not itself a cost, but its financing burden needed separate recognition, adjusting operating profit downward to reflect this genuine economic reality.
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Gearing Adjustment (with worked example)
Recognising who bears the burden of inflation-driven capital needs
The gearing adjustment recognised that, to the extent an entity's assets were financed by debt rather than equity, part of the additional capital maintenance burden (depreciation, COSA, MWCA adjustments) was effectively borne by lenders (whose fixed monetary claims lose real value in inflation), not by shareholders – the gearing adjustment credited back a proportion of the total adjustments, based on the entity's debt-to-total-capital ratio.
Example 2: Applying the gearing adjustment
An entity's total current cost adjustments (depreciation + COSA + MWCA) reduce operating profit by $200,000. The entity is financed 40% by debt and 60% by equity.
Gearing adjustment = 200,000 × 40% = $80,000 credited back to profit – reflecting that 40% of the additional capital maintenance burden is effectively absorbed by lenders (whose real claim value erodes with inflation), leaving equity shareholders bearing only the remaining 60% ($120,000) of the total adjustment.
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The Current Purchasing Power (CPP) Alternative
A simpler, general index-based alternative
IAS 15 also permitted the simpler CPP approach – restating the entire set of financial statements using a general price index, rather than the asset-by-asset specific replacement cost adjustments of CCA. CPP was generally considered less theoretically sound (since a general index doesn't necessarily reflect specific price changes for an entity's particular assets) but was significantly easier and cheaper to apply.
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Why Compliance Became Voluntary, Then Withdrawn
Diminishing inflation, diminishing urgency
As global inflation rates moderated significantly through the 1980s and 1990s (following aggressive central bank tightening worldwide), the practical urgency of general price-level accounting diminished dramatically. Compliance with IAS 15 was made explicitly voluntary in 1989 – and by 2003, with most major economies experiencing low, stable inflation, the IASB judged the standard no longer necessary and formally withdrew it, leaving IAS 29's much narrower hyperinflation-specific guidance as the sole remaining IFRS response to price-level distortion.
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Disclosure Requirements (Historical)
Required (voluntary) disclosures under IAS 15
The nature of the adjustments (CCA or CPP), and the methods and price indices used Current cost operating profit, and each of the four adjustments (depreciation, COSA, MWCA, gearing) separately Supplementary current cost balance sheet information
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Critical Judgments & Estimates (Historical)
Where management judgement mattered most
SIGNIFICANT JUDGEMENTS
Whether to apply CCA or the simpler CPP approach, given both remained genuinely available options Selecting appropriate specific price indices for individual asset categories under CCA
SIGNIFICANT ESTIMATES
Current replacement cost of specific PPE and inventory items Debt-to-total-capital ratio used in the gearing adjustment calculation
The four-adjustment CCA model was widely regarded as genuinely complex and resource-intensive to apply correctly – a significant practical barrier that, combined with moderating global inflation, ultimately outweighed the standard's theoretical benefits.
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IAS 15 vs Modern IAS 29
Comparison – IAS 15 (1981, general inflation) vs IAS 29 (current, hyperinflation only)
FeatureIAS 15 (withdrawn)Current (IAS 29)
Applicable environmentsAny inflationary environment, entirely voluntaryOnly hyperinflationary economies (broadly, ~100%+ cumulative 3-year inflation), mandatory
Method(s) offeredCCA (four adjustments) OR the simpler CPP approachA single, specific general purchasing power restatement method
Level of technical sophisticationVery high (four distinct CCA adjustments)Considerably simpler – a single index-based restatement, without CCA's granular adjustments
IAS 15 represented the high-water mark of general inflation accounting sophistication within IFRS – its withdrawal, and the much narrower/simpler IAS 29 that remains, reflects a deliberate retreat from comprehensive general price-level accounting once global inflation stabilised.
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Statement Mapping (Historical, Under IAS 15)
Comprehensive event-to-statement mapping table
Event / transactionStatement(s) affectedNotes
Current cost profit/loss statement (supplementary)NotesVoluntary supplementary presentation, not part of primary statements
Depreciation adjustmentNotesIncreases charge to reflect current replacement cost
Cost of sales adjustment (COSA)NotesRemoves inventory holding gains from operating profit
Monetary working capital adjustmentNotesRecognises additional financing burden
Gearing adjustmentNotesCredits back the debt-financed proportion of adjustments
Primary historical cost financial statementsSOFP SOPLRemained unaffected – CCA/CPP information was purely supplementary
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Related Standards
Cross-reference map
StandardConnection
IAS 6 (also withdrawn)The direct, less-developed predecessor standard on the same topic
IAS 29The only surviving IFRS guidance on price-level distortion, narrowly confined to hyperinflationary economies
IAS 16Governs the normal historical cost/revaluation model that IAS 15's supplementary CCA information sat alongside, not instead of
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Quick-Reference Glossary
Cost of sales adjustment (COSA)
An adjustment removing inventory holding gains (arising purely from price changes) from reported operating profit.
Gearing adjustment
A credit recognising that lenders, not shareholders, effectively bear the debt-financed proportion of an entity's additional capital maintenance burden under inflation.
Current cost operating profit
Historical cost operating profit, adjusted for depreciation, cost of sales, and monetary working capital, to reflect the maintenance of the entity's operating capability at current prices.
Holding gain
The increase in the replacement cost of an asset held during a period, arising purely from price changes rather than genuine operating activity.
Monetary working capital adjustment (MWCA)
An adjustment recognising the additional funding needed for working capital at current prices, reflecting the financing burden of inflation.
Financial statement key
BS Balance sheet
IS Income statement
SE Statement of changes in equity
OCI Other comprehensive income
SCF Statement of cash flows