Translation to a Hyperinflationary Presentation Currency: IAS 21's New Translation Method for Non-Hyperinflationary Functional Currencies

In November 2025, the International Accounting Standards Board (IASB) issued amendments to IAS 21 "The Effects of Changes in Foreign Exchange Rates" on translating amounts from a functional currency that is the currency of a non-hyperinflationary economy into a presentation currency that is the currency of a hyperinflationary economy.

Key points

• The IASB has issued amendments to IAS 21 on translation into a hyperinflationary presentation currency.

• The amendments apply only to entities whose presentation currency is the currency of a hyperinflationary economy and whose own functional currency, or the functional currency of whose foreign operations, is the currency of a non-hyperinflationary economy.

• The amendments require all amounts (including comparative amounts) to be translated from the functional currency that is the currency of a non-hyperinflationary economy into the presentation currency that is the currency of a hyperinflationary economy using the closing rate at the date of the most recent statement of financial position.

• The amendments also include an exception under which entities whose functional and presentation currency is the currency of a hyperinflationary economy do not retranslate the comparative amounts of foreign operation(s) whose functional currency is that of a non-hyperinflationary economy.

• The amendments are effective for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted.

What is the issue?

In November 2025, the International Accounting Standards Board (IASB) issued amendments to IAS 21 "The Effects of Changes in Foreign Exchange Rates" on translating amounts from a functional currency that is the currency of a non-hyperinflationary economy into a presentation currency that is the currency of a hyperinflationary economy.

These amendments result from an issue submitted to and discussed by the IFRS® Interpretations Committee ("the Committee") in June 2023. The Committee observed that the existing requirements of IAS 21 did not provide an adequate basis for translating amounts from a functional currency that is the currency of a non-hyperinflationary economy into a presentation currency that is the currency of a hyperinflationary economy. This could lead to diversity in the accounting applied by entities, resulting in information that is not useful to users of financial statements. The IASB agreed with the Committee on proposing amendments to IAS 21 to improve information for users of financial statements in a cost-effective way.

What is the impact and who is affected?

The amendments apply to an entity whose presentation currency is the currency of a hyperinflationary economy and whose own functional currency (or the functional currency of its foreign operations) is the currency of a non-hyperinflationary economy.

For example:

• An Argentine entity whose functional currency is the US dollar and whose presentation currency is the Argentine peso.

• A Turkish entity whose functional and presentation currency is the Turkish lira and which consolidates a subsidiary whose functional currency is the euro.

These amendments may not apply to many entities applying IFRS® Accounting Standards; however, where they do apply, the changes described below may be significant.

The amendments require all amounts (that is, assets, liabilities, equity items, and income and expenses, including comparative amounts) to be translated from the functional currency that is the currency of a non-hyperinflationary economy into the presentation currency that is the currency of a hyperinflationary economy using the closing rate at the date of the most recent statement of financial position.

However, there is an exception where an entity's functional and presentation currencies are currencies of hyperinflationary economies and the functional currency of its foreign operation(s) is the currency of a non-hyperinflationary economy. In this scenario, the comparative amounts of the foreign operation(s) do not need to be retranslated. Instead, the comparative amounts included in the entity's previously issued financial statements are restated by applying the change in the general price index used for comparative amounts under IAS 29 "Financial Reporting in Hyperinflationary Economies".

Let us apply these amendments to the examples above:

• An Argentine entity using the US dollar as its functional currency and the Argentine peso as its presentation currency will translate all amounts (including comparative amounts) from its functional currency into its presentation currency using the closing rate at the date of the most recent statement of financial position.

• If the Argentine entity had a subsidiary abroad, it could not apply the exception in the amendments, because the Argentine entity's own functional currency is not the currency of a hyperinflationary economy.

• A Turkish entity whose functional and presentation currency is the Turkish lira and which has a subsidiary whose functional currency is the euro will translate all amounts relating to its subsidiary, except the subsidiary's comparative amounts, at the closing rate at the date of the most recent statement of financial position. Because the entity's functional and presentation currency is that of a hyperinflationary economy, it will apply the exception in the amendments. The Turkish entity will therefore apply the change in the general price index used for IAS 29 purposes to translate the comparative amounts of its European subsidiary.

The amendments also require additional disclosures when translating into a hyperinflationary presentation currency. These include disclosure of the translation method applied and summarised financial information about the foreign operation(s) to which the translation method is applied.

When do the amendments apply?

The amendments are effective for annual reporting periods beginning on or after 1 January 2027. Earlier application is permitted, subject to local endorsement.

What are the transition requirements?

Entities must apply the amendments retrospectively in accordance with IAS 8. However, entities applying the amendments for the first time are not required to disclose the information specified in paragraph 28(f) of IAS 8 (that is, for the current period and each prior period presented, the amount of the adjustment for each financial statement line item affected and, where applicable, for basic and diluted earnings per share).

The amendments provide additional transition relief for entities whose functional and presentation currencies are currencies of hyperinflationary economies and whose foreign operations have a functional currency that is the currency of a non-hyperinflationary economy. On first applying the amendments, these entities apply the change in the general price index to the comparative information of their foreign operations included in the financial statements for the previous reporting period, regardless of which translation method was used in those financial statements. This relief means that these entities do not need to restate comparative amounts using the closing exchange rate and can then apply the change in the general price index used for IAS 29 purposes to the comparative amounts.