IFRIC agenda decision: How to assess whether an entity is operating in a hyperinflationary economy

Groups with subsidiaries operating in hyperinflationary or potentially hyperinflationary economies should be aware of the IFRS Interpretations Committee’s recent agenda decision, published in July 2025.

Accounting is different for entities operating in hyperinflationary economies

Preparers may not be aware that a separate accounting standard, IAS 29 Financial reporting in hyperinflationary economies, is dedicated to accounting by entities that operate in hyperinflationary economies.

This is particularly relevant for Australian groups with subsidiaries operating in countries with high levels of inflation because IAS 29 requires the financial statements (including any comparative periods) to be stated in terms of the measuring unit current at the end of the applicable reporting period. This is because the currency of a hyperinflationary economy loses a significant amount of purchasing power from period to period, such that presenting financial information based on historical amounts, even if only a few months old, does not provide relevant information to users of financial statements.

What is a hyperinflationary economy?

The term ‘hyperinflation’ is not defined in IAS 29 as it is a matter of judgement. IAS 29, paragraph 3, provides the following characteristics of a hyperinflationary economy:

This Standard does not establish an absolute rate at which hyperinflation is deemed to arise. It is a matter of judgement when restatement of financial statements in accordance with this Standard becomes necessary. Hyperinflation is indicated by characteristics of the economic environment of a country which include, but are not limited to, the following:

  1. the general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency. Amounts of local currency held are immediately invested to maintain purchasing power;
  2. the general population regards monetary amounts not in terms of the local currency but in terms of a relatively stable foreign currency. Prices may be quoted in that currency;
  3. sales and purchases on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even if the period is short;
  4. interest rates, wages and prices are linked to a price index; and
  5. the cumulative inflation rate over three years is approaching, or exceeds, 100%.

IAS 29, paragraph 3

What is the issue?

The IFRS Interpretations Committee (Committee) received a request about how to apply IAS 29  to determine when an economy becomes hyperinflationary. The questions included:

  1. Should all indicators in paragraph 3 of IAS 29 be considered in assessing when an economy becomes hyperinflationary, or would one suffice (i.e. should an entity continue to consider all indicators in paragraph 3, even when one indicator has already been met)?
  2. Does IAS 29 require an entity to consider indicators other than those listed in paragraph 3 of IAS 29, if relevant?
  3. Does IAS 29 require both a subsidiary (in its individual financial statements) and a parent (in its consolidated financial statements) to reach the same conclusion as to when an economy becomes hyperinflationary?

Committee’s findings

The Committee found that there is little, if any, diversity in understanding the requirements for assessing when an economy becomes hyperinflationary. Evidence gathered by the Committee indicated that stakeholders:

  • Do not conclude that an economy becomes hyperinflationary based solely on one of the indicators listed in paragraph 3 of IAS 29
  • Consider indicators other than those listed in paragraph 3 of IAS 29 when relevant
  • Do not reach different conclusions for different levels within a group when preparing financial statements using the same basis of preparation
  • Use judgement when considering the indicators in paragraph 3 of IAS 29 and might assign different weights to those, or other, indicators.

Committee’s conclusion

The Committee concluded that this issue does not have a widespread effect and, therefore, decided not to add a standard-setting project to the work plan.

However, feedback from Committee members and responses to the tentative agenda decision highlighted challenges experienced by entities applying the requirements in paragraphs 3–4 of IAS 29 to determine when an economy becomes hyperinflationary. The Committee therefore suggested that the International Accounting Standards Board consider this feedback in assessing whether to add a project on hyperinflation to its work plan.

More information

Based on the International Monetary Fund’s World Economic Outlook (IMF WEO), BDO produces a six-monthly snapshot of countries that are considered hyperinflationary. Our latest snapshot contains a list of countries that are hyperinflationary as at 30 June 2025, countries that have become hyperinflationary (or have ceased to be hyperinflationary) during 2025, and countries that are at risk of becoming hyperinflationary in the second half of 2025 and beyond.

Burundi is a new hyperinflationary economy for 30 June 2025, and Angola, Egypt, Myanmar, Nigeria, Syria, and Zimbabwe are on the ‘watchlist’, i.e. they are at risk of becoming hyperinflationary for reporting dates beyond 30 June 2025. Ethiopia ceased to be a hyperinflationary economy in 2025.

Need help?

Although our snapshot makes it easier for you to assess whether one of your subsidiaries operates in a hyperinflationary economy, the accounting under IAS 29 is complex. Please contact BDO’s IFRS & Corporate Reporting team if you need help.