Response 2 - PwC

Paul Lee Chair UK Endorsement Board 6th Floor 10 South Colonnade London E14 4PU

12 June 2026

Dear Paul

I am responding on behalf of PricewaterhouseCoopers LLP to your invitation to comment on the Draft Endorsement Criteria Assessment (DECA) of Translation to a Hyperinflationary Presentation Currency (Amendments to IAS 21)

We continue to support globally consistent standards and encourage endorsement of international accounting standards, without any regional modifications and carve-outs where possible. Accordingly, we support the endorsement of the amendments to IAS 21, as proposed in the DECA. Our responses to the questions in the Invitation to Comment are "yes", except for question 6 as we are not a preparer of financial statements that could be affected by the amendments.

From a UK perspective, we observe that the issue of translating financial statements into a hyperinflationary presentation currency is rarely encountered among UK-reporting entities. Nonetheless, the amendments provide a practical solution to reduce diversity in practice for those entities that are affected, and we welcome their adoption.

Our global network, PricewaterhouseCoopers International Limited, submitted a detailed comment letter to the IASB on the Exposure Draft in October 2024, which we attach to this response.

If you have any questions in relation to this letter please do not hesitate to contact me.

Yours sincerely

Jessica Taurae
Head of UK Corporate Reporting Services
PricewaterhouseCoopers LLP
[email protected]

Exposure Draft: Translation to a Hyperinflationary Presentation Currency

23 October 2024

Andreas Barckow
Chair
International Accounting Standards Board (IASB)

Dear Andreas,

We are responding to your invitation to comment on the Exposure Draft Translation to a Hyperinflationary Presentation Currency on behalf of the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. This response summarises the views of member firms that contributed to our discussions during the comment period.

We support the overall intention of the project to remove diversity in practice, and to improve the reporting of financial information for hyperinflationary presentation currencies. We observe that, with the benefit of a wider project scope and more time, the IASB would be able to make more fundamental improvements to IAS 21 and/or IAS 29. However, if a more immediate solution is needed to reduce diversity in practice, on balance we support the approach of identifying a practical and targeted solution.

The proposals aim to address two scenarios:

• scenario 1 – an entity with a functional currency of a non-hyperinflationary economy presenting its financial statements in the currency of a hyperinflationary economy; and
• scenario 2 – a foreign operation with a functional currency of a non-hyperinflationary economy consolidating into a parent with a presentation currency of a hyperinflationary economy.

For scenario 1, we think that the proposed translation method works well in all aspects (that is, it is easy for preparers to apply and it provides more useful information than the current translation method applied in practice).

For scenario 2, we have a concern as to whether the benefits of the proposals outweigh their costs. In particular, although some of the proposals could reduce operational costs for preparers, we have concerns that the retranslation of comparative information would impose additional consolidation processes (and therefore cost) compared to one of the approaches commonly applied in practice. See our response to question 1 and the example in Appendix II to this letter for further information. We recommend that the IASB ensure that it has sufficient feedback from preparers on this issue to conclude on the cost/benefit balance before finalising the proposals.

Appendix I to this letter sets out our responses to the questions in the Exposure Draft.

Please contact Gary Berchowitz if you would like to discuss our responses.

Yours sincerely

Eric Clarke
Global Chief Accountant and Head of Reporting
[email protected]

PricewaterhouseCoopers International Limited
1 Embankment Place
London WC2N 6RH
T: +44 (0) 20 7583 5000, F: +44 (0) 20 7822 4652

PricewaterhouseCoopers International Limited is registered in England number 3590073. Registered Office: 1 Embankment Place, London WC2N 6RH.

Appendix I

1—Proposed translation method

The proposed amendments to IAS 21 would require that when an entity’s presentation currency is the currency of a hyperinflationary economy but the functional currency is the currency of a non-hyperinflationary economy, the entity translates its financial statements (or the results and financial position of a foreign operation), including comparatives, at the closing rate at the date of the most recent statement of financial position.

We think that an approach similar to that described in paragraph BC3(b) of the Exposure Draft could have been further researched for scenario 2 (as described in our cover letter). We think that this approach has merits and, from our experience, it is the approach applied in practice by entities. However, we understand that developing that approach would have resulted in the IASB needing to reconsider some fundamental questions relating to both IAS 21 and IAS 29. Based on the IASB’s current standard-setting agenda and priorities, overall we therefore support the proposed translation method as a cost-effective solution at this stage.

However, we have concerns with the proposed retranslation of comparative information for scenario 2. Consistent with the IASB’s analysis in paragraph BC31, the proposed translation method contemplates the retranslation of the comparative information using the current-year exchange rate for the foreign operations with non-hyperinflationary functional currency, while the information for the part of the group that applies IAS 29 will be restated by using an inflation index. There is therefore a difference between the foreign operations applying IAS 21 and the other part of the group applying IAS 29. We believe this proposal would require a reconsolidation of the non-hyperinflationary foreign operations as a result, and accounting for the ‘elimination difference’ that arises from that process, since the parent and the foreign operations would be following two different approaches. There is no guidance in the proposed amendments on what such a difference represents and where to present it. This would likely result in diversity in practice. We have included a numerical example illustrating this issue in Appendix II.

We therefore recommend the IASB engage with more preparers before deciding to proceed with this proposal, considering whether the benefits outweigh the costs. Some alternatives that the IASB might consider are as follows:

1. Include two different translation methods for comparative information in proposed paragraph 41A of IAS 21 (for entities in scenario 1, the comparative information should be restated using the current closing exchange rate, but entities in scenario 2 should restate using a general price index in accordance with IAS 29).
2. Provide a policy choice in paragraph 41A of IAS 21 for entities under scenario 2 to select which method to use to retranslate comparative information (using either the current closing exchange rate or the general price index in accordance with IAS 29).

In addition, on a drafting note, we note that paragraph 39 is being amended. We understand from paragraph BC9 that the IASB’s intention is to achieve consistency in wording with the new paragraph 41A. However, we notice that the proposed amendments to paragraph 39 refer to an entity’s functional and ‘its’ presentation currency. This might cause confusion for the application of this paragraph in circumstances where a subsidiary translates its financial information for consolidation purposes - given that, in this case, the subsidiary will not have ‘its’ own presentation currency, since the translation is performed for consolidation purposes. We suggest that the IASB amend the wording in a way that would avoid this confusion. The same comment applies to the wording of paragraph 41A.

2—Proposed disclosure requirements

The proposed amendments to IAS 21 would require an entity using the proposed translation method to disclose:

1. the fact that it applies the translation method in proposed paragraph 41A (proposed paragraph 53A(a));
2. summarised financial information about its foreign operations translated applying proposed paragraph 41A (proposed paragraph 53A(b)); and
3. if the economy referred to in proposed paragraph 41A ceased to be hyperinflationary, that fact (proposed paragraph 54A).

We agree with the proposed disclosure requirements. In the case of the disclosure requirement for summarised financial information, we observe that comparable disclosure requirements specify that the requirements apply for material foreign operations and provide some guidance on how to present the financial information (for example, paragraphs B12 and B13 of IFRS 12). We understand that this was assessed by the IASB and it was decided that the inclusion of such guidance was not needed. We recommend that the rationale for this decision be reflected in the Basis for Conclusions, to avoid questions on whether this guidance would apply for these disclosure requirements.

3—Proposed disclosure requirements for subsidiaries without public accountability

The IASB proposes to require an eligible subsidiary (subsidiaries that are permitted and elect to apply IFRS 19 Subsidiaries without Public Accountability: Disclosures) to disclose the same information as that which would be required of other entities applying IFRS Accounting Standards (that is, the IASB proposes not to reduce the disclosure requirements for an eligible subsidiary).

We do not have specific comments on the proposed disclosure requirements for subsidiaries without public accountability.

4—Other aspects: Transition requirements and requirements when the economy ceases to be hyperinflationary

The IASB proposes:

1. to require an entity to apply the amendments retrospectively in accordance with IAS 8;
2. not to require an entity to disclose the information that would otherwise be required by paragraph 28(f) of IAS 8 or by paragraph 178(f) of IFRS 19; and
3. to permit an entity to apply the amendments earlier than the effective date.

If the economy referred to in proposed paragraph 41A ceases to be hyperinflationary, the proposed amendments to IAS 21 would require the entity to apply paragraph 39 of IAS 21 prospectively to amounts arising after the end of its previous reporting period—that is an entity would not restate amounts arising before the end of its previous reporting period.

We do not have specific comments on either the transition proposals or the proposals for when an economy ceases to be hyperinflationary.

Appendix II

Retranslation of comparative information for a non-hyperinflationary subsidiary consolidating into a parent with a hyperinflationary presentation currency

In this appendix, we present a simplified example of the extra process that would be involved in retranslating the comparative information of a subsidiary applying the translation method proposed in the Exposure Draft.

Illustrative example

Group A is composed of a parent with a hyperinflationary functional currency (FC), subsidiary A with a hyperinflationary FC and subsidiary B with a non-hyperinflationary FC. Group A presents its consolidated financial statements in a hyperinflationary presentation currency (PC), as required by the regulator in its jurisdiction.

This example focuses only on the mechanisms applied to retranslate the comparative financial information.

Assumed exchange rates and inflation:

Financial information of the group as of 31 December 2023:

Column D is calculated by applying the closing exchange rate (CU3) to the financial information in the non-hyperinflationary FC, as required by the Exposure Draft.

Financial information of group A as of 31 December 2023 for the purposes of presenting as comparative information in 31 December 2024 financial statements:

We understand that, currently, many entities applying the existing standard retranslate the comparative information of the group by applying the inflation rate as required by IAS 29 (this is consistent with the discussions held at IFRIC).

In those cases, in our illustrative example, the comparative information would be calculated as follows:

Column G is calculated by multiplying column F by the factor that reflects the inflation of the year (in this case, 1.8). No extra step is required to present the 2023 financial information as comparative information in 2024.

Using the requirements in the Exposure Draft

Group A, applying the amendments proposed in the Exposure Draft, would need to apply two different ‘restatement’ methods for different parts of the group. See the numerical example below of how the group would need to restate the comparative information:

Clarifications:

• Column H and I: calculated by multiplying column A and B by the factor that reflects the inflation of the year (in this case, 1.8). Same process as in the current approach.
• Column J: for the non-hyperinflationary subsidiary, the financial information in the non-hyperinflationary functional currency will need to be translated into the currency closing exchange rate (CU 4).
• Column K: the eliminations of the year are where a problem will arise. The investments in subsidiaries from the parent would have been restated by an inflation index, and so the elimination should be indexed with the same percentage to match. However, the capital of subsidiary B has been translated using the current closing exchange rate. An ‘elimination difference’ therefore arises. We understand that the proposed amendments do not provide any guidance on how to account for such a difference, which would likely lead to diversity in practice.

Summary

The proposed translation method for comparative information of a non-hyperinflationary subsidiary consolidating into the currency of a hyperinflationary parent requires extra processes when compared with what many entities are doing now, as follows:

1. It requires a group to segregate its consolidation schedule into two types of entity (hyperinflationary and non-hyperinflationary subsidiaries), and to apply different mechanisms to restate the comparative figures for these two types of subsidiary; and
2. As a consequence of applying these two different mechanisms, an elimination difference arises that will need to be dealt with. Judgement will need to be applied on where to present the elimination difference, which might result in diversity in practice.