Case 4 relates to an eco experiencing hyper-inflation & now the translation is to be done, I’ve a series of doubts in this:
- In case of US GAAP we consider Reporting Currency(RC) = Functional Currency(FC) i.e., we convert Non-Monetary A/L at historical rates but what about Monetary A/L(MA/L)?
If we convert them at Current Rate as done in case of Temporal Method won’t the asset/liability vanish?
- In case of IFRS, we don’t adjust MA/L due to inflation, still while we translate we do it at the current rate so will not the MA/L vanish due to that?
Please help me understand this & correct wherever my understanding is wrong. Thank you!
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Shubham aapne jo IFRS wala part samjhaya, I have a doubt, aapne kha we don’t adjust & so we Gain/Loose due to inflation, mera Q ye tha ki agar apne adj nhi krenge toh kya MA/ML urr nhi jaega because of converting at a current rate? Sly, US GAAP m, we know in case of hyper-inflation we don’t use All Current method jo kehta h B/S wali items ko Current rate m convert krna chahie aur isliye we use Temporal method, mera sawal yahi tha ki agar apne Temporal use krenge jiske hisab sae Monetary Asset/Liability ko Current rate m convert krna hota h, kya esa nhi hoga ki ek waqt ke baad Ma/L gayab hi jaaye?
currency depreciated ke wajaha se monetary asset aur monetary liabilities dono ka values kam hoga but hamara monetary asset ka value kam hoga jisse loss mei jayega monetary liability ka bhi value kum ho jayega. Humlog ye assume kr rahe h jo hmra liability h woh fix h tho inflation ki wjha se real term mei hmlog kum pay krenge so currency depreciated se hume faida ho jayega.
Ok mtlb MA/L urr nhi jaega as a result of converting it at a current rate without any adj?