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IAS 15: Accounting Treatment for Changing Prices (an Optional Standard)

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Summary of IAS 15

In October 1989 IAS 15 Was Made Optional
In October 1989, the IASC issued a Board Statement making IAS 15 optional, not mandatory. IASC granted that exemption because of the failure to reach an international consensus on the disclosure of information reflecting the effects of changing prices. However, enterprises are encouraged to disclose information reflecting the effects of changing prices and, where they do so, to disclose the items required by IAS 15.
In December 2003, the IASB withdrew IAS 15 as part of its Improvements Project, effective 1 January 2005.

Objective of IAS 15

The objective of IAS 15 is to specify disclosures reflecting the effects of changing prices on the measurements used in the determination of an enterprise's results of operations and its financial position.

Applicability

IAS 15 applies to enterprises whose levels of revenue, profit, assets or employment are significant in the economic environment in which they operate. When both parent and consolidated financial statements are presented, the information specified by IAS 15 need be presented only on a consolidated basis. [IAS 15.3]

Method for reflecting changing prices

The enterprise must select one of two broad accounting methods for reflecting the effects of changing prices: [IAS 15.8]
  • General purchasing power approach. Restate financial statements for changes in the general price level.
  • Current cost approach. Measure balance sheet items at replacement cost. IAS 15 allows a variety of methods of adjusting income under the current cost approach.

What should be disclosed

The following items should be disclosed, at a minimum, based on the chosen method for reflecting the effects of changing prices: [IAS 15.21-23]
  • Adjustment to depreciation
  • Adjustment to cost of sales
  • Adjustments relating to monetary items
  • The overall effect on net income of the above three items
  • Current cost of property, plant and equipment and of inventories, if the current cost approach is used
  • Description of the methods used to compute the above adjustments
The disclosures can be made on a supplementary basis or in the primary financial statements. [IAS 15.24]

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