Non-monetary assets and liabilities are restated in terms of the measuring unit current at the end of the reporting period. An entity should use the increase in the general price index from the transaction date when they were first recognised to the end of the reporting period.
No restatement is required for non-monetary assets and liabilities carried at amounts current at the end of the reporting period, such as net realisable value or fair value.
Non-monetary assets and liabilities carried at historical cost
Most non-monetary items are carried at cost or cost less depreciation, and so they are expressed at amounts current at the date of acquisition. The restated cost, or cost less depreciation, of each item is determined by applying the change in a general price index from the date of acquisition to the end of the reporting period to the item’s historical cost and accumulated depreciation. Property, plant and equipment (that is carried at cost less depreciation), inventories of raw materials and merchandise, goodwill, patents, trademarks and similar assets are therefore restated from the dates of their purchase. Partly finished and finished goods included in inventory are restated from the dates on which the costs of purchase and of conversion were incurred.
Detailed records of the acquisition dates of items of property, plant and equipment might be unavailable or not possible to estimate. In such rare circumstances, it might be necessary to use an independent professional valuation of the items as the basis for their restatement in the first period of application of IAS 29. It is expected that entities with effective internal controls over financial reporting would have the systems in place containing detailed records of property, plant and equipment.
Non-monetary assets that have been restated following the guidance in IAS 29 are still subject to impairment assessment in accordance with the relevant guidance. If an asset’s recoverable amount is less than its restated amount, the asset is written down, even if no impairment of the asset was required in the historical cost financial statements. Any impairment charge is recognised in profit or loss.
Entities that have tested assets for impairment in previous reporting periods should consider whether the restatement of asset carrying values for inflation would affect the outcome of the impairment test. Adjustments to the outcome of a previous impairment test should be made without using hindsight. Entities should also consider whether there are any indications suggesting that assets that were not tested in previous periods are impaired.
Non-monetary assets and liabilities carried at fair value or revalued amounts
Some non-monetary items might be carried at amounts current at dates other than the acquisition date or the balance sheet date. This would include, for example, property, plant and equipment that has been revalued under the revaluation model allowed by IAS 16. In such cases, the carrying amounts are updated so that they are expressed in terms of the carrying amounts at the end of the reporting period by restating the revalued carrying amounts from the date of the revaluation.