Argentina treated as hyperinflationary economy

Nippon Sheet Glass Company Limited – Annual report – 31 March 2019

Industry: manufacturing

1.2. Changes in accounting policies and disclosures (extract)
From the second quarter of the Group’s financial period commencing 1 April 2018, the Group has applied hyperinflationary accounting adjustments when consolidating the financial results and positions of its subsidiaries in Argentina as required by IAS 29 ‘Financial Reporting in Hyperinflationary Economies’. Adjustments have been made to present the financial results and position of the Group’s subsidiaries in Argentina using the measuring unit current as at the period end date. This has involved applying Argentina inflation to the underlying results and balance sheet net assets of these businesses. As required by IAS 21 ‘The Effects of Changes in Foreign Exchange Rate’, the Group has used closing period-end exchange rates when consolidating the cash flows and comprehensive income of its subsidiaries in Argentina. The financial effect of applying this approach as at 31 March 2019, is a decrease in revenues of ¥1,650 million, a decrease in operating profit of ¥560 million, a decrease in profit for the period of ¥1,620 million and a decrease in profit attributable to owners of the parent of ¥920 million. Shareholders’ equity was increased by ¥1,680 million.

40. Hyperinflationary accounting adjustments
As from Q2 FY2019, the wholesale price index in Argentina indicated that cumulative 3-year inflation had exceeded 100 percent. Consequently the Group has concluded that its subsidiaries in Argentina, each of which has the Argentine Peso as a functional currency, are currently operating in a hyperinflationary environment. The Group has therefore applied accounting adjustments to the underlying financial results and position of its subsidiaries in Argentina as required by IAS 29 ‘Financial Reporting in Hyperinflationary Economies’.

As required by IAS 29, the Group’s consolidated financial statements will include the results and financial position of its Argentinian subsidiaries, restated in terms of the measuring unit current at the period end date.

For the restatement of results and financial positions of its Argentinian subsidiaries, the Group will apply the conversion coefficient derived from the Internal Wholesales Price Index (IPIM) published by Instituto Nacional de Estadística y Censos de la República Argentina (INDEC). IPIM and corresponding conversion coefficients from June 2006 are presented below.
nsg1

The Group’s subsidiaries in Argentina have restated their non-monetary items held at historical cost, namely property, plant and equipment, by applying the conversion coefficient based on when the items were initially recognized. Monetary items and non-monetary items held at current cost will not be restated, as they are considered to be expressed in terms of the measuring unit current at the period
end date. The effect of inflation on the net monetary position of the Group’s Argentinian subsidiaries is presented in the finance expenses section of the income statement.

The Argentinian subsidiaries’ income statement and cash flow statement will also be restated, applying the conversion coefficient for the current financial year as shown in the above table.

For the purpose of consolidation, the results and financial position of the Group’s Argentinian subsidiaries are translated using the closing exchange rates at the period end date. Comparative financial statements are not restated based on IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’ para 42(b).

9. Finance income and expenses

nsg2

nsg3