Abstract
Research background: Inflation, a macroeconomic phenomenon, may lead to an inaccurate presentation of financial data included in the financial statements, which otherwise should present a relevant and reliable information on financial health of the company. Purpose of the article: The purpose of the article is to point out the relevance and quality of data contained in the financial statements in the context of existence of inflationary pressure in the economy, and thus point out the importance of inflation accounting in the practice of business entities in the current situation (and not only in hyperinflation economics). Methods: In accordance with the purpose and the theoretical nature of the article, there will be preferably used the method of analysis and comparison of existing literature, method of opinion confrontation, method of synthesis and generalization. The subject of the analysis will be principally scientific sources dating from the 70s of last century to the present and IAS 29. Findings & Value added: The comprehensive elaboration of the issue in question from a theoretical point of view is a basic prerequisite for the carrying out the empirical research in conditions of Slovakia, pointing to its pros/cons and possible obstructions of its implementation in the process of financial reporting under current economic situation that except other is characterized by a general rise in the prices of economic goods, while inflationary pressures are currently being seen as a worldwide problem.
Highlights
The primary objective of the financial statements, generally financial reporting respectively, is to provide reliable and relevant economic and financial information on economic entities
Findings & Value added: The comprehensive elaboration of the issue in question from a theoretical point of view is a basic prerequisite for the carrying out the empirical research in conditions of Slovakia, pointing to its pros/cons and possible obstructions of its implementation in the process of financial reporting under current economic situation that except other is characterized by a general rise in the prices of economic goods, while inflationary pressures are currently being seen as a worldwide problem
The current economic situation is characterized by an effort to “restart” the national economies of individual countries of the world, despite the still present COVID-19 crisis
Summary
The primary objective of the financial statements, generally financial reporting respectively, is to provide reliable and relevant economic and financial information on economic entities. Providing high quality and useful accounting information is a prerequisite for the efficiency of the company (Zamel et al, 2020) and all the companys stakeholders (Kliestik et al, 2020; Svabova et al, 2020; Mazanec & Bartosova, 2021). It may be the case that, despite the effort to present a true and fair view of events that occur in the company, financial statements are unable to provide relevant information due to inflation if inflationary “pressures” are not reflected in the financial statement data. The accounting financial reporting regime is mostly nominal, which assumes no changes to the purchasing power of money over time (Zamel et al, 2020). The systematic decrease in purchasing power and destroyer of wealth, is a rudimentary fact that creates serious financial reporting and financial management problems. Financial reports can become extremely unsatisfactory and misleading (Bello, 2017) and using the right method of accounting is crucial for decision-making purposes of the company (Flynn, 1977 ; Mbambo et al, 2020; Ebiaghan, 2019)
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