[Draft] ECA - Translation to a Hyperinflationary Presentation Currency (IAS 21)

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OFFICIAL - PUBLIC DRAFT UKEB UK Endorsement Board

April 2026

The UKEB does not accept any liability to any party for any loss, damage or costs howsoever arising, whether directly or indirectly, whether in contract, tort or otherwise from any action or decision taken (or not taken) as a result of any person relying on or otherwise using this document or arising from any omission from it.

© 2026 All Rights Reserved

Contents

Introduction

Purpose

1The purpose of this [Draft] Endorsement Criteria Assessment ([Draft] ECA) is to determine whether Translation to a Hyperinflationary Presentation Currency (Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates) (Amendments) issued by the International Accounting Standards Board (IASB) in November 2025 meet the UK's statutory requirements for adoption as set out in Regulation 7 of Statutory Instrument 2019/6851 (SI 2019/685).

2The Amendments have an effective date of 1 January 2027 with earlier application permitted, subject to the UKEB adoption for use in the UK.

3The UKEB did not influence the development of the Amendments2 due to the extremely limited direct impact for UK companies. This approach was agreed in its Regulatory Strategy 2024/253.

Background to the Amendments

4Table 1 in this [Draft] ECA provides a brief description of the Amendments.

Scope of the Adoption Assessment

5The Amendments make changes to the mandatory parts of IAS 21 and IAS 29 Financial Reporting in Hyperinflationary Economies [and consequentially to the mandatory parts of IFRS 19 Subsidiaries without Public Accountability: Disclosures]4. These changes to the mandatory parts of the standards form part of the UKEB's adoption assessment.

6As UK-adopted international accounting standards comprise only the mandatory5 sections of standards6, the amendments to the Basis for Conclusions of IAS 21 [and IFRS 19] are not adopted by the Board and are not considered in this [Draft] ECA.

Structure of the Assessment

7Tables 2-4 discusses how the Amendments meet the UK statutory requirements for adoption of new or amended international accounting standards described in Appendix B.

[Draft] Adoption Decision

8[On the basis of these assessments, the UKEB [tentatively] concludes that the Amendments meet the statutory endorsement criteria. The UKEB is therefore [tentatively] of the view that it will adopt the Amendments for use in the UK.]

Description and Assessment of the Amendments

Description

Title and issue date of final amendments Origin What has changed?
Translation to a Hyperinflationary Presentation Currency (Amendments to IAS 21) was issued on 13 November 2025. The IFRS Interpretations Committee (IFRIC) received a submission7 about the application of IAS 21 and IAS 29 on the consolidation of a subsidiary whose functional currency is the currency of a non-hyperinflationary economy (non-hyperinflationary currency) by a parent whose functional currency is the currency of a hyperinflationary economy (hyperinflationary currency). Diversity in practice was observed because IAS 21 (which addresses the effects of changes in foreign exchange rates) and IAS 29 (which addresses financial reporting in hyperinflationary economies) do not specify whether the parent is required to restate the current year and comparative amounts presented for its subsidiary whose functional currency is a non-hyperinflationary currency. To address this matter the IASB issued an ED in July 2024 to propose narrow-scope amendments to IAS 21. The IASB finalised and issued the Amendments in November 20258. The Amendments specify the translation requirements for an entity whose presentation currency is that of a hyperinflationary economy, and either its own functional currency or that of its foreign operation is that of a non-hyperinflationary economy. Further background information can be found on pages 4 and 5 of the ED. The Amendments make the following changes to IAS 21:
  • Add paragraph 41A to clarify the translation requirements for entities with a non-hyperinflationary functional currency and a hyperinflationary presentation currency. An entity with this currency combination is required to translate all amounts, including comparatives, at the closing rate at the date of the most recent statement of financial position.
  • Add paragraph 41B to clarify the translation requirements for when the economy of the entity's presentation currency ceases to be hyperinflationary.
  • Add paragraph 47A to introduce an exception to the key requirement for entities with a hyperinflationary presentation currency and who translate the results and financial position of a foreign operation that has a non-hyperinflationary functional currency. An entity is required to apply paragraph 34 of IAS 29, i.e. to restate the comparatives by applying the general price index it applies to corresponding figures for the previous financial reporting period.
  • Add paragraphs 53A, 53B and 54A to complement the 'new' translation requirements with relevant disclosure requirements that include: information about the foreign operations, and the approach used for these foreign operations' comparative information.
Other than the above key requirement changes, minor wording changes were made to the existing IAS 21 requirements and consequential amendments were made to IFRS 19. Amendments were also made to IAS 29 to add references to the new translation requirements.
Transition requirements An entity shall apply the Amendments for annual reporting periods beginning on or after 1 January 2027. Early application is permitted. An entity is required to apply the Amendments retrospectively in accordance with IAS 8 except in defined circumstances, where the Amendments specify the transition approach and certain disclosures. An entity is not required to disclose the information that would otherwise be required by paragraph 28(f) of IAS 8 (or paragraph 178(f) of IFRS 19 if applying IFRS 19).
Relevance and reliability Understandability Comparability
Clarification of the translation requirements The Amendments clarify the translation requirements for (i) entities with a non-hyperinflationary functional currency and a hyperinflationary presentation currency, and (ii) when the economy of the entity's presentation currency ceases to be hyperinflationary and its functional currency continues to be non-hyperinflationary. The clarification is relevant for users' decision making and is expected to result in financial information that faithfully represents the underlying economics. The Amendments are expected to provide the context of financial information in the affected entities' financial statements, i.e. whether the information was presented in a hyperinflationary currency and whether the entity operated in a hyperinflationary environment. The Amendments should ensure the financial information is not distorted by the effects of a hyperinflationary presentation currency. Clarification of translation requirements The Amendments clarify the translation requirements for an entity that presents financial statements in a hyperinflationary currency while operating in a non-hyperinflationary currency. This enables users to understand the context of translation outcomes, making the financial information straightforward to interpret. Clarification of translation requirements The clarification is expected to result in consistent application of the translation requirements and remove the existing diversity in practice. This enables users to compare the amounts in the financial statements as needed for their analysis. The exception required for translation of comparative information of a foreign operation that has a non-hyperinflationary functional currency is expected to lead to consistent application and hence comparable financial information in the financial statements.
Disclosure requirements about foreign operations Foreign operations that operate in a non-hyperinflationary environment are likely to have different risk profiles compared to those operating in a hyperinflationary environment. Therefore the disclosure provides relevant and reliable information that enables users to assess the effects of these foreign operations on the entity's financial position and performance. Disclosure requirements about foreign operations The disclosure enables users to understand the composition of the amounts presented in the entity's financial statements as well as the characteristics and risk profiles of the foreign operations.
Conclusion: Overall, the UKEB [tentatively] concludes that the Amendments meet the criteria of relevance, reliability, understandability, and comparability required of the financial information needed for making economic decisions and assessing the stewardship of management, as required by Regulation 7(1)(c) of SI 2019/685.

9Paragraph BC82 of the Amendments explains that one of the benefits for the IASB's decision to require, rather than permit, the application of the exception was to reduce diversity in practice.9

Description Conclusion
As discussed above, the Amendments are expected to meet the criteria of relevance, reliability, understandability, and comparability of financial information. Reliability includes the notion of faithful representation of the economic substance of transactions and events. The technical accounting criteria assessment underpins the overall true and fair view assessment. The assessment has not identified any requirement of the Amendments, either alone or in conjunction with international accounting standards adopted for use in the UK, that would prevent individual or group accounts prepared using the Amendments from giving a true and fair view of the undertaking's or group's assets, liabilities, financial position and profit or loss. The UKEB is satisfied, therefore, that the circumstances in which the application of the Amendments would result in accounts which did not give a true and fair view would be extremely rare. Overall, the UKEB [tentatively] concludes that the Amendments are not contrary to the true and fair view principle set out in Regulation 7(1)(a) of SI 2019/685.
Description of entities that will be impacted Do the amendments improve financial reporting? Costs for preparers and users
The Amendments specify the translation requirements for entities whose presentation currency is that of a hyperinflationary economy and either its own functional currency or that of its foreign operation is that of a non-hyperinflationary economy. Based on UKEB desk-based research, a minimal number of UK-listed entities are expected to use a hyperinflationary currency as a presentation currency.10 This is consistent with stakeholders' feedback. On this basis, the UKEB expects that the Amendments will affect a negligible number of entities using UK-adopted international accounting standards, if any. Moreover, the UKEB has received no indication from stakeholders that the number of entities using UK-adopted international accounting standards with a hyperinflationary currency as a presentation currency would be expected to substantially increase in the future. The Amendments provide an improvement in financial reporting by clarifying the translation requirements for:
  • entities with a non-hyperinflationary functional currency and a hyperinflationary presentation currency;
  • when the economy of the entity's presentation currency ceases to be hyperinflationary and its functional currency continues to be non-hyperinflationary; and
  • entities with a hyperinflationary presentation currency and who translate the results and financial position of a foreign operation that has a non-hyperinflationary functional currency.
The Amendments also complement the translation requirements with relevant disclosure requirements. As discussed in the technical accounting criteria assessment above, the Amendments are expected to result in relevant, reliable, understandable, and comparable financial information for entities whose presentation currency is that of a hyperinflationary economy, and either its own functional currency or that of its foreign operation is that of a non-hyperinflationary economy. Therefore it is expected that the Amendments will improve financial reporting.		 Preparers: Given that the Amendments are expected to affect a minimal number of entities using UK-adopted international accounting standards, the associated market-wide implementation costs are expected to be minimal as well.
Conclusion: Having considered all relevant aspects, including the costs and benefits of implementing the Amendments, the UKEB [tentatively] concludes that the use of the Amendments is likely to be conducive to the long term public good in the UK as required by Regulation 7(1)(b) of SI 2019/685.

10According to the IMF World Economic Outlook published in October 2025, the inflation level in the following countries would classify their economies as hyperinflationary: Argentina, Burundi, Haiti, Islamic Republic of Iran, Lebanon, Malawi, Sierra Leone, South Sudan, Turkey, Venezuela and Zimbabwe. The projected three-year cumulative inflation of these economies exceeded 100% as of October 2025.

The UKEB conducted a proportionate qualitative assessment of the costs and benefits that are likely to materialise, if preparers apply the Amendments.11

The UKEB expects that preparers that need to apply the Amendments will incur minimal, if any, implementation costs, since they are consistent with existing practice in the UK. This is because the translation methods in the Amendments are already specified in IAS 21 and IAS 29 and the Amendments simply specify the exchange rate that is to be applied.12 As such, the Amendments do not result in a significant change to the fundamental principles of the standards.

Users: Users are expected to incur minimal costs, if any, since the Amendments are consistent with existing practice that they already understand, and simply specify the exchange rate that is to be applied. The disclosure requirements of the Amendments are also expected to be straightforward to interpret. On balance, the Amendments are unlikely to require significant changes to users' methods or analyses.

Users: The Amendments should improve the usefulness of information presented to users of financial statements since translated amounts will be presented in terms of the measuring unit current at the end of the reporting period. The Amendments should also improve the comparability of the financial statements by reducing the existing diversity in practice. Finally, users may also benefit from being able to translate amounts for their own analysis with less effort.

Preparers: The Amendments provide clarity to preparers by explicitly specifying the translation requirements they should apply when translating amounts from a non-hyperinflationary currency to a presentation currency which is that of a hyperinflationary economy.

Whether the amendments are likely to have an adverse effect on UK economy

amounts translated from a non-hyperinflationary currency to a hyperinflationary presentation currency will be more reliable.

As such, if these Amendments were applied, they are not expected to have an adverse effect on the UK economy or economic growth.

The UKEB has not identified any factors that would indicate the Amendments leading to an adverse effect on the UK economy. This is on the basis that the Amendments are limited in scope and expected to improve financial reporting as compared to the current requirements of IAS 21. The Amendments should improve the quality of information provided to users of financial statements, since

Do the Amendments lead to a significant change in accounting practice?

9The UKEB is required to assess whether or not the Amendments are likely to lead to a 'significant change in accounting practice' and therefore meet the criteria for a post-implementation review.

10The Amendments do not fundamentally change the requirements in IAS 21, IAS 29 [or IFRS 19], or introduce new principles. The Amendments merely clarify the translation requirements for an entity whose presentation currency is that of a hyperinflationary economy and either its own functional currency or that of its foreign operation is that of a non-hyperinflationary economy. The Amendments also complement these requirements with relevant disclosure requirements. In addition, the Amendments are considered to affect a minimal number of entities in the UK.

11As a result, the UKEB [tentatively] concludes that the Amendments are not likely to lead to a significant change in accounting practice and do not meet the criteria requiring a mandatory post-implementation review under Regulation 11 in SI 2019/685.

Appendix A: Glossary

Term Description
The Amendments Translation to a Hyperinflationary Presentation Currency (Amendments to IAS 21)
ECA Endorsement Criteria Assessment
ED Exposure Draft
EFRAG European Financial Reporting Advisory Group
IASB International Accounting Standards Board
IAS International Accounting Standard
IAS 1 Presentation of Financial Statements
IAS 8 Basis of Preparation of Financial Statements
IAS 21 The Effects of Changes in Foreign Exchange Rates
IAS 29 Financial Reporting in Hyperinflationary Economies
IFRIC The IFRS Interpretations Committee
IFRS International Financial Reporting Standard(s)
IFRS 19 Subsidiaries without Public Accountability: Disclosures
SI Statutory Instrument
UKEB UK Endorsement Board

Appendix B: UK statutory requirements for adoption

Introduction

B1This appendix sets out the UK statutory requirements for the adoption of new or amended international accounting standards, and the endorsement criteria assessment approach.

B2Paragraph 1 of Regulation 7 of SI 2019/685 requires that an international accounting standard only be adopted if:

(a) the standard13 is not contrary to either of the following principles—

  1. an undertaking's accounts must give a true and fair view of the undertaking's assets, liabilities, financial position and profit or loss;
  2. consolidated accounts must give a true and fair view of the assets, liabilities, financial position and profit or loss of the undertakings included in the accounts taken as a whole, so far as concerns members of the undertaking;

(b) the use of the standard is likely to be conducive to the long term public good in the United Kingdom; and (c) the standard meets the criteria of understandability, relevance, reliability and comparability required of the financial information needed for making economic decisions and assessing the stewardship of management.

Approach to the endorsement criteria

B3This [Draft] ECA assesses the criteria above, in the following order:

a) Whether the Amendments meets the criteria of relevance, reliability, understandability and comparability required of the financial information needed for making economic decisions and assessing the stewardship of management (Regulation 7(1)(c)). We refer to these criteria collectively as the 'technical accounting criteria' (refer to Table 2).

b) Whether the Amendments are not contrary to the principle that an entity's accounts must give a true and fair view (Regulation 7(1)(a)) (refer to Table 3).

c) Whether use of the Amendments is likely to be conducive to the long term public good in the UK (Regulation 7(1)(b)). Regulation 7(2) of SI 2019/685 includes specific areas to consider for this assessment (refer to Table 4). They are:

i. whether the Amendments are likely to improve the quality of financial reporting; ii. the costs and benefits that are likely to result from the use of the Amendments; and iii. whether the Amendments are likely to have an adverse effect on the economy of the UK, including on economic growth.

Technical accounting criteria: Relevance, Reliability, Understandability and Comparability14

B4A description of the technical accounting criteria15 is provided below:

Technical criteria assessment
Relevance Information is relevant if it is capable of making a difference in the decision-making of users or in their assessment of the stewardship of management. The information may aid predictions of the future, confirm or change evaluations of the past, or both.
Reliability Financial information is reliable if, within the bounds of materiality, it: a) can be depended on by users to represent faithfully what it either purports to represent or could reasonably be expected to represent; b) is complete; and c) is free from material error and bias.
Understandability Financial information should be readily understandable by users with a reasonable knowledge of business and economic activities and accounting, and a willingness to study the information with reasonable diligence.
Comparability Information is comparable if it enables users to identify and understand similarities in, and differences among, items. Information about an entity should be comparable with similar information about other entities and with similar information about the same entity for another period.

B5In conducting the overall assessment against the technical accounting criteria, the UKEB adopts an absolute, rather than a relative, approach. This is an absolute assessment against the criteria (do the Amendments provide information that is understandable, relevant, reliable and comparable?) rather than a relative one (do the Amendments provide information that is more or less understandable, relevant, reliable and comparable than current, or any other, accounting?). When an assessment of any individual aspect or requirement of the Amendments uses comparative language (e.g. 'enhances comparability'), this does not mean that the objective is to reflect a real comparison in relative terms. Instead, the objective is to explain that any individual aspect or requirement of the Amendments has the potential to “enhance” one or more of the qualitative characteristics.

B6A separate comparative consideration of whether the Amendments are likely to enhance or maintain the quality of financial reporting is included within the UK long term public good assessment in Table 4.

True and fair view assessment16

B7The first adoption criterion, set out in Regulation 7(1) of SI 2019/685, states that an international accounting standard can only be adopted if:

“[....] the standard is not contrary to either of the following principles—

a) an undertaking's accounts must give a true and fair view of the undertaking's assets, liabilities, financial position and profit or loss; b) consolidated accounts must give a true and fair view of the assets, liabilities, financial position and profit or loss of the undertakings included in the accounts taken as a whole, so far as concerns members of the undertaking; [....]"

B8For the sake of brevity, UKEB refers to the assessment against this endorsement criterion as 'the true and fair view assessment' and to the principles set out in Regulation 7(1)(a) as the 'true and fair principle'. However, these abbreviated expressions do not imply that the assessment has considered anything other than the full terms of the endorsement criterion set out above.

B9The duty of the UKEB under Regulation 7(1)(a) is to determine generically, whether that standard is 'not contrary' to the true and fair principle. In other words, it is an ex-ante assessment. The UKEB has therefore considered whether the Amendments contain any requirements that would prevent accounts prepared using the Amendments from giving a true and fair view.

B10The approach is to determine whether the Amendments are not contrary to the true and fair principle in respect of any of the specific items identified in Regulation 7(1)(a) (namely, the assets, liabilities, financial position and profit or loss) in the context of the preparation of the accounts as a whole. A holistic approach has been taken to this assessment, considering the impact of the Amendments taken as a whole, including its interaction with other UK-adopted international accounting standards.

B11For the purposes of the assessment, the UKEB considers the requirement in paragraph 6A of IAS 8 Basis of Preparation of Financial Statements to 'present fairly the financial position, financial performance and cash flows of an entity'17 to be equivalent to the Companies Act 2006 requirement for accounts to give a true and fair view.

B12This assessment is separate from the duty of directors under section 393(1) of the Companies Act 2006, which requires directors to be satisfied that a specific set of accounts gives a true and fair view of an undertaking's or group's assets, liabilities, financial position and profit or loss.

Do the Amendments lead to a Significant Change in Accounting Practice?

B13A standard adopted by the UKEB under Regulation 6 of SI 2019/685 that it considers is likely to lead to a 'significant change in accounting practice', is subject to the requirements in paragraph 3 of Regulation 11 of SI 2019/685. This requires the UKEB to:

(a) carry out a review of the impact of the adoption of the standard; and (b) publish a report setting out the conclusions of the review no later than 5 years after the date on which the standard takes effect (being the first day of the first financial year in respect of which it must be used)".

B14Paragraphs 9-11 discusses whether the Amendments lead to a significant change in accounting practice.

Contact Us UK Endorsement Board 1 Harbour Exchange | London | E14 9GE www.endorsement-board.uk

Footnotes

Footnotes

  1. The International Accounting standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019 No. 685 (SI 2019/685) ↩

  2. In July 2024, the IASB published an exposure draft (ED) Translation to a Hyperinflationary Presentation Currency. ↩

  3. See page 18 of the UKEB's Regulatory Strategy 2024/25 ↩

  4. [At the time of the [Draft] ECA's drafting, IFRS 19 has not been adopted for the use in the UK. The adoption decision is expected to be made after the UKEB's April 2026 meeting.] ↩

  5. The introduction to the IASB's yearly bound volumes differentiates between mandatory and non-mandatory sections of the standards. Mandatory pronouncements relate to IFRS Accounting Standards, IAS Standards, Interpretations and Mandatory Application Guidance. These are UK-adopted international accounting standards. Non-mandatory guidance includes Bases for Conclusion, Dissenting Opinions, Implementation Guidance and Illustrative Examples, together with the IFRS Practice Statements. These are not adopted by the UKEB as they are not international accounting standards, as defined in SI 2019/685. ↩

  6. The term 'standard' is used to refer to amendments to international accounting standards, in line with the definition of 'international accounting standards' in SI 2019/685, which includes 'subsequent amendments to international accounting standards'. ↩

  7. IFRIC June 2022 meeting—Consolidation of a Non-hyperinflationary Subsidiary by a Hyperinflationary Parent (IAS 21 and IAS 29) ↩

  8. The IASB introduced an exception in the final Amendments to address stakeholders' concerns associated with the costs of re-translation of comparative information for foreign operations with a non-hyperinflationary functional currency. See 'What has changed?' section. ↩

  9. Paragraph BC82 of the Amendments explains that one of the benefits for the IASB's decision to require, rather than permit, the application of the exception was to reduce diversity in practice. ↩

  10. According to the IMF World Economic Outlook published in October 2025, the inflation level in the following countries would classify their economies as hyperinflationary: Argentina, Burundi, Haiti, Islamic Republic of Iran, Lebanon, Malawi, Sierra Leone, South Sudan, Turkey, Venezuela and Zimbabwe. The projected three-year cumulative inflation of these economies exceeded 100% as of October 2025. ↩

  11. According to SI 2019/685, in deciding whether the use of a standard is likely to be conducive to the long term public good in the United Kingdom, the UKEB must have regard to "the costs and benefits that are likely to result from the use of the standard." ↩

  12. The translation methods described in the Amendments were already set out in paragraph 42 of IAS 21 and paragraph 34 of IAS 29. The Amendments would enable entities which use a hyperinflationary currency as a presentation currency to apply the same translation methods. ↩

  13. The term "standard" includes standards (International Accounting standards (IAS), International Financial Reporting standards (IFRS)), amendments to those standards and related Interpretations (Standing Interpretations Committee / International Financial Reporting Interpretations Committee interpretations) issued or adopted by the IASB. ↩

  14. Refer to Table 2 Technical accounting criteria assessment. ↩

  15. These descriptions are based on the qualitative characteristics of financial statements in the Framework for the Preparation and Presentation of Financial Statements adopted by the IASB in April 2001. These qualitative characteristics became part of the criteria for endorsement and adoption of IFRS in the EU's IAS Regulation (1606/2002), and, subsequently, in SI 2019/685. ↩

  16. Refer to Table 3 True and fair view assessment. ↩

  17. The requirement in paragraph 6A of IAS 8 was moved from paragraph 15 of IAS 1 Presentation of Financial Statements unchanged following the issuance of IFRS 18 Presentation and Disclosure in Financial Statements. The title of IAS 8 was changed from Accounting Policies, Changes in Accounting Estimates and Errors to Basis of Preparation of Financial Statements. This change is effective on 1 January 2027. ↩