So the text says that under IFRS all components of stockholder’s equity are restated by applying the change in the general price level from beginning of period, or, if later, from date of contribution to the balance sheet date. Why do we not restate retained earnings then? The only item that problem questions I have seen restate is common stock.
Retained earnings is the plug figure after restatement of other balance sheet items bringing it back to balance in much the same manner as in current rate method used for subsidiary accounting. On the Income statement we have beginning Retained earnings minus (revenues minus expenses )= net purchasing power gain/loss.Retained earnings are volatile and change as a result of operations during the year whereas capital stock does not.
thanks