IPSAS 10
Active
Financial Reporting in Hyperinflationary Economies
Prescribes accounting and disclosure for entities whose functional currency is that of a hyperinflationary economy – restating the financial statements (SOFP, statement of financial performance, and cash flow statement) into the measuring unit current at the reporting date using a general price index, with an exit rule when the economy ceases to be hyperinflationary. Includes Appendix A on first-year restatement and deferred tax. Effective 1 July 2002 (paras. 1–39).
Active Standard
IPSAS 10 Financial Reporting in Hyperinflationary Economies is the current, active standard issued by the IPSASB for entities whose functional currency is that of a hyperinflationary economy. It is effective for annual financial statements covering periods beginning on or after 1 July 2002 (earlier application encouraged). Paras. 2–3 were deleted; the current Standard comprises paras. 1–39 (plus Appendix A, added 2025).
IPSAS 10 is drawn from IAS 29 Financial Reporting in Hyperinflationary Economies, adapted for the public sector and expanded with Appendix A based on IFRIC 7 guidance (embedded as authoritative text in §8).
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Objective, Scope & Definitions (paras. 1–7)
Objective & scope
Prescribes the accounting treatment, in consolidated and individual financial statements, for an entity whose FUNCTIONAL CURRENCY is that of a hyperinflationary economy – plus the treatment when the economy ceases to be hyperinflationary.
Applies to an entity preparing accrual-basis financial statements (including consolidated statements) whose functional currency is hyperinflationary
Why unrestated reporting fails: in a hyperinflationary economy, money loses purchasing power so fast that comparing amounts from transactions occurring at different times – even within the SAME reporting period – is misleading (para. 4).
Key definitions (para. 7)
Carrying amount of an asset
The amount recognized in the SOFP, after deducting accumulated depreciation and accumulated impairment losses.
Carrying amount of a liability
The amount recognized in the SOFP.
Non-monetary items
Items that are NOT monetary items (per IPSAS 4's monetary-item definition).
Paras. 2–3 [Deleted]. All paragraphs, 1–39, have equal authority.
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Identifying Hyperinflation (paras. 5–6)
No bright-line rate – a matter of judgment, guided by these characteristics
IPSAS 10 does NOT establish an absolute inflation rate that triggers restatement. Judgment is required, informed by characteristics of the economic environment:
The general population prefers to hold wealth in non-monetary assets or a stable foreign currency; local currency held is immediately invested to preserve purchasing power The population thinks in terms of a stable foreign currency rather than the local currency; prices may be quoted in it Credit sales/purchases price in the expected purchasing-power loss over the credit period, even if short Interest rates, wages, and prices are LINKED to a price index The cumulative inflation rate over three years is APPROACHING OR EXCEEDS 100%
It's preferable that all entities reporting in the same hyperinflationary currency start applying the Standard from the SAME date – but each entity applies it from the beginning of the period in which IT identifies hyperinflation, regardless of what others do (para. 6).
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Restating the Statement of Financial Position (paras. 11, 14–26)
The core requirement & monetary items
All SOFP amounts → stated in terms of the measuring unit CURRENT AT THE REPORTING DATE
Comparatives (and any earlier-period information) are ALSO restated to the current measuring unit – no supplementing unrestated statements, and separate presentation of pre-restatement figures is discouraged (para. 9). Budgetary information included for comparison is restated too (para. 10).
MONETARY items → NOT restated (already expressed in current terms) Index-linked items (e.g. index-linked bonds/loans) → adjusted per their own agreement
Non-monetary items – the general price index method
Restated cost = Historical cost × (Price index at reporting date ÷ Price index at acquisition date)
Applied to items carried at cost or cost-less-depreciation (PP&E, inventories, goodwill, patents), from their ACQUISITION date Items already carried at CURRENT amounts (e.g. NRV, fair value) are NOT restated Previously REVALUED items are restated from the date of that revaluation, not the original acquisition date
If acquisition-date records are unavailable, an independent professional valuation may substitute in the first year of application (para. 19). If no general price index exists for the required period, an estimate based on FX-rate movements against a stable currency may be used (para. 20).
Impairment, borrowing costs & opening net assets/equity (paras. 22–26)
After restatement, apply IPSAS 21 or IPSAS 26 impairment tests – restated PP&E/goodwill/patents reduced to recoverable amount; restated inventories reduced to NRV An equity-method investee reporting in a hyperinflationary currency is restated FIRST, then translated at closing rates if it's also a foreign operation Borrowing costs that compensate for inflation are NOT also capitalized on top of the restated capital expenditure – that inflation component is expensed instead (para. 23) FIRST-period application: all net assets/equity components except accumulated surpluses/deficits and any revaluation reserve are restated from their contribution/origin dates; any prior revaluation reserve is ELIMINATED; restated accumulated surpluses/deficits are the derived "plug" from the rest of the restated SOFP (para. 25)
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Restating the Statement of Financial Performance & Cash Flow Statement (paras. 27, 30)
Same principle, applied to flows instead of balances
Every item in the statement of financial performance is restated by applying the change in the general price index from the date each item of revenue/expense was ORIGINALLY RECORDED to the reporting date. Cash flow statement items are restated on the same basis (para. 30) – everything ends up expressed in the measuring unit current at the reporting date.
In practice, revenue/expenses that accrue evenly through the year are often restated using the AVERAGE price index for the period, rather than transaction-by-transaction (see the worked example in §9).
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Gain or Loss on Net Monetary Position (paras. 28–29)
Who gains, who loses
NET MONETARY ASSET position (monetary assets > monetary liabilities) → the entity LOSES purchasing power as prices rise NET MONETARY LIABILITY position (liabilities > assets) → the entity GAINS purchasing power, to the extent those items aren't price-linked
Gain/loss ≈ General price index change × weighted-average net monetary position for the period
Where it lands
The gain/loss on net monetary position is included in the STATEMENT OF FINANCIAL PERFORMANCE. The index-linked-item adjustment (para. 16) is OFFSET against it. Related items – interest revenue/expense, FX differences on invested/borrowed funds – are separately disclosed but may usefully be presented ALONGSIDE the net monetary gain/loss, since they're all part of the same underlying exposure (para. 29).
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Consolidated Financial Statements & Corresponding Figures (paras. 31–34)
Consolidation mechanics
A controlled entity reporting in ITS OWN hyperinflationary currency is restated using ITS country's general price index BEFORE inclusion in the controlling entity's consolidated statements If that controlled entity is also a FOREIGN operation, its restated statements are then translated at CLOSING rates (per IPSAS 4) Controlled entities that do NOT report in hyperinflationary currencies are handled entirely under IPSAS 4 instead Different reporting dates being consolidated → ALL items (monetary or not) are restated into the measuring unit current at the CONSOLIDATED statements' date (para. 33)
Corresponding figures & the price index (paras. 31, 34)
Prior-period comparatives – whether originally on a historical cost or current value basis – are restated using a general price index so the comparative statements are ALSO expressed in the current reporting date's measuring unit.
It's preferable that all entities reporting in the same economy's currency use the SAME general price index for consistency (para. 34).
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Economies Ceasing to Be Hyperinflationary (para. 35)
The exit rule – freeze, don't unwind
Last restated amounts (measuring unit current at the END of the previous reporting period) become the new "historical cost" going forward
When an entity discontinues IPSAS 10 restatement because the economy is no longer hyperinflationary, it does NOT reverse or unwind the restatement already applied – those final restated figures simply become the carrying-amount baseline for all subsequent financial statements.
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Appendix A – First-Year Restatement & Deferred Tax (paras. A1–A4)
What this Appendix clarifies
Added January 2025 (Amendments to IPSAS Standards: Specific IFRIC Interpretations), effective periods beginning on/after 1 January 2026. Addresses the FIRST reporting period an entity identifies hyperinflation, when the PRIOR period was not hyperinflationary.
(a) How to interpret "measuring unit current at the reporting date" (para. 11) on FIRST application (b) How to account for OPENING deferred tax items in the restated statements
This Appendix is an INTEGRAL part of IPSAS 10, drawing on guidance analogous to IFRIC 7 under IFRS.
The "as if always hyperinflationary" approach (paras. A2–A3)
Apply the Standard's requirements AS IF the economy had always been hyperinflationary Historical-cost non-monetary items: restate the OPENING SOFP (earliest period presented) to reflect inflation from the date assets were acquired / liabilities incurred, through to the reporting date Non-monetary items already carried at a non-acquisition current amount: restate from the date THAT carrying amount was determined instead Subsequent periods: restate corresponding figures by applying the CHANGE in the measuring unit for that period ONLY, to the previous period's already-restated financial statements
Deferred tax items in the opening SOFP are determined per the relevant income tax accounting guidance (para. A4) – IPSAS 10 itself doesn't prescribe deferred tax mechanics.
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Worked Example – Full Restatement (Illustrative Example IE1–IE2)
Assumptions
General price index: 120 at the START of the period, 180 at the END, averaging 150 during the period Inventory on hand at period-end assumed acquired later in the period, when the index was 170 Revenue and expenses (other than depreciation) accrue evenly through the year → average index (150) applied Assets with historical cost of 7,500 were fully depreciated and scrapped at nil salvage value
Statement of Financial Position – unadjusted vs restated
ItemUnadjustedFactorRestated
Cash & investments10,000–10,000
Inventories2,000180/1702,118
Physical assets, cost40,000180/12060,000
Accum. depreciation(20,000)180/120(30,000)
Total assets32,00042,118
Borrowings26,000–26,000
Net assets b/fwd4,000180/1206,000
Net surplus for period2,000–10,118
Restated total net assets (6,000 + 10,118 = 16,118) reconcile to restated total assets less borrowings (42,118 − 26,000 = 16,118).
Statement of Financial Performance – unadjusted vs restated
ItemUnadjustedFactorRestated
Revenues50,000180/15060,000
Depreciation(5,000)180/120(7,500)
Other expenses(43,000)180/150(51,600)
Gain on net monetary position––9,218
Surplus for the year2,00010,118
The 9,218 gain on net monetary position is derived INDIRECTLY – as the balancing figure needed to reconcile restated non-monetary movements with the restated surplus (para. 28).
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Disclosure Requirements & Effective Date (paras. 36–39)
Required disclosures (para. 36)
That the financial statements and comparatives have been restated for changes in the general purchasing power of the functional currency, and are stated in the measuring unit current at the reporting date The identity and level of the price index at the reporting date, and its movement during the current AND previous reporting periods
Amendment history at a glance
Base Standard: periods beginning on/after 1 July 2002.
EffectiveChange
1 Jan 2011Paras. 17, 18, 22 – Improvements to IPSAS (Jan 2010)
1 Jan 2013Para. 1 renumbered to 1A, new para. 1 – Improvements to IPSAS 2011
1 Jan 2017Para. 39 (IPSAS 33); paras. 2, 3 deleted (Applicability of IPSAS)
1 Jan 2019Para. 22 (IPSAS 40); paras. 1A, 9 (Improvements to IPSAS, 2018)
1 Jan 2025Para. 31 – IPSAS 46, Measurement
1 Jan 2026New Appendix A (§8) – Specific IFRIC Interpretations amendments (Jan 2025)
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Relationship to IAS/IFRS – Comparison with IAS 29
Comparison – IPSAS 10 vs IAS 29
IPSAS 10 is drawn primarily from IAS 29, Financial Reporting in Hyperinflationary Economies, including the IASB's May 2008 Improvements to IFRS.
TopicDifference
Terminology"Revenue," "statement of financial performance," "net assets/equity" (IPSAS 10) vs "income," "income statement," "equity" (IAS 29)
Current cost restatement guidanceIAS 29 covers this; IPSAS 10 does NOT include it
Illustrative exampleIPSAS 10 includes a worked restatement example using the indirect method (see §9) – not present in IAS 29 itself
Appendix A authorityIPSAS 10 embeds AUTHORITATIVE text based on IFRIC 7 guidance directly in Appendix A (§8) – under IFRS, IFRIC 7 is a separate document
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Statement / Process Mapping
Restatement decision map
- Does the functional currency's economy show hyperinflation indicators (§2)? If no → IPSAS 10 doesn't apply
- Is the item MONETARY? → leave as-is (already current). Is it NON-monetary at cost? → restate using the general price index from its acquisition (or revaluation) date
- Is the non-monetary item already at a CURRENT value (NRV, fair value)? → no restatement needed, but still test for impairment against the OTHER restated figures
- Restate every SOFPerformance item using the index movement from when it was recorded (average index acceptable for evenly-accruing items)
- Derive the gain/loss on net monetary position as the balancing figure, and present it in surplus/deficit
- Is this the FIRST year applying IPSAS 10? → follow Appendix A's "as if always hyperinflationary" approach (§8)
- Has the economy since STOPPED being hyperinflationary? → freeze the last restated amounts as the new historical cost baseline; do not unwind (§7)
Concept-to-statement mapping table
IPSAS 10 conceptStatement(s)Notes
Restated non-monetary assets/liabilitiesSOFPGeneral price index applied from acquisition/revaluation date
Restated net assets/equity componentsNA/ERevaluation reserves eliminated on first application
Restated revenue & expensesSOFPerfIndex movement from the original recording date
Gain/loss on net monetary positionSOFPerfDerived indirectly as a balancing figure
Restated cash flow statement itemsCash FlowSame measuring-unit-current principle applies
Price index identity, level & movementNotesMandatory disclosure, para. 36
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Related Standards – Cross-Reference Map
How IPSAS 10 connects across the IPSAS body of literature
StandardNature of the connection
IPSAS 1Statement of Changes in Net Assets/Equity disclosure of period movements applies to the restated figures (§3)
IPSAS 3General policy-selection basis in the absence of explicit IPSAS 10 guidance
IPSAS 4Governs comparative-amount translation into a different presentation currency (paras. 47(b), 48) and the translation of hyperinflationary foreign operations (§6)
IPSAS 5Interaction with borrowing-cost capitalization – the inflation component is expensed, not capitalized twice (§3)
IPSAS 21 / 26Impairment testing of restated non-monetary assets (§3)
IPSAS 33First-time adoption interaction – effective-date mechanics (§10)
IPSAS 40Public sector combinations – amended the impairment cross-reference at para. 22 (§10)
IPSAS 46Measurement – amended the comparative-restatement paragraph 31 (§10)
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Quick-Reference Glossary
General price index
An index reflecting changes in the general purchasing power of a currency, used to restate financial statement amounts.
Monetary items
Money held and assets/liabilities to be received or paid in fixed or determinable amounts of money.
Non-monetary items
Items that are not monetary items – generally restated for inflation using a general price index.
Net monetary position
The difference between an entity's monetary assets and monetary liabilities, exposed to purchasing-power gains/losses.
Carrying amount
The SOFP-recognized amount of an asset (net of accumulated depreciation/impairment) or a liability.
Measuring unit current at the reporting date
The purchasing-power basis to which all restated financial statement amounts are expressed.
Financial statement key
SOFP Statement of financial position
SOFPerf Statement of financial performance
NA/E Net assets/equity (statement of changes)