FRS 24 has the effect, for those entities that are applying it, of implementing IAS 29 ‘Financial Reporting in Hyperinflationary Economies’ and withdrawing the existing requirements on the subject, UITF Abstract 9 ‘Accounting for operations in hyper-inflationary economies’.

The FRS applies, for accounting periods beginning on or after 1 January 2005, to all listed entities preparing their financial statements in accordance with UK requirements—including listed parent undertakings preparing individual financial statements in accordance with those requirements.  Other entities are permitted to apply the FRS, as long as they apply certain other FRSs at the same time.  For accounting periods beginning on or after 1 January 2006, unlisted entities using fair value measures will also be required to comply with the FRS.  Proposals on the application of the FRS to other unlisted entities are expected to be issued during the first half of 2005.

In a hyperinflationary economy, reporting of operating results and financial position in the local currency without restatement is not useful.  Money loses purchasing power at such a rate that comparison of amounts from transactions and other events that have occurred at different times, even within the same accounting period, is misleading.  FRS 24 prescribes how an entity whose functional currency is the currency of a hyperinflationary economy should report its operating results and financial position.  It also provides guidance on determining whether an economy is a hyperinflationary economy.