Hyperinflationary Economies Research Articles

Generation of financial position statements by Syrian companies in the context of hyperinflation. Part 2

Subject. This article examines inflation, its impact on the statements of financial position of companies of the Syrian Arab Republic, and the adjustment of their data taking into account consumer price indices in the context of hyperinflation, based on the provisions of IAS 29 – Financial Reporting in Hyperinflationary Economies. Objectives. The article aims to study the effects of inflation on Syrian companies, identify and solve the problems of compiling the Statement of Financial Position. Methods. For the study, I used observation, comparison, generalization, and interpretation. Scientific works and publications of scientists dealing with inflation and its impact on financial reporting, the Central Bureau of Statistics (Syria) (CBS) data on consumer price indices, provisions of IAS 29 on the formation of reporting by organizations whose functional currency is the currency of the hyperinflationary economy, are the methodological basis of the study. Results. The article describes the impact of inflation on the financial position of Syrian companies, and discusses the method of adjusting the financial statements of Syrian companies in the conditions of hyperinflation. It also compares the reporting data with indicators calculated on the basis of historical information. Conclusions and Relevance. The article confirms the hypothesis about the positive impact of the adoption of IAS 29 on the Statement of Financial Position preparation. If companies operate in an economy prone to hyperinflation, the applicability of IAS 29 is justified, moreover, this Standard will help improve the reliability of information presentation for making management decisions.

Generation of financial position statements by Syrian companies in the context of hyperinflation. Part 1

Subject. This article examines inflation, its impact on the statements of financial position of companies of the Syrian Arab Republic, and the adjustment of their data taking into account consumer price indices in the context of hyperinflation, based on the provisions of IAS 29 – Financial Reporting in Hyperinflationary Economies. Objectives. The article aims to study the effects of inflation on Syrian companies, identify and solve the problems of compiling the Statement of Financial Position. Methods. For the study, I used observation, comparison, generalization, and interpretation. Scientific works and publications of scientists dealing with inflation and its impact on financial reporting, the Central Bureau of Statistics (Syria) (CBS) data on consumer price indices, provisions of IAS 29 on the formation of reporting by organizations whose functional currency is the currency of the hyperinflationary economy, are the methodological basis of the study. Results. The article describes the impact of inflation on the financial position of Syrian companies, and discusses the method of adjusting the financial statements of Syrian companies in the conditions of hyperinflation. It also compares the reporting data with indicators calculated on the basis of historical information. Conclusions and Relevance. The article confirms the hypothesis about the positive impact of the adoption of IAS 29 on the Statement of Financial Position preparation. If companies operate in an economy prone to hyperinflation, the applicability of IAS 29 is justified, moreover, this Standard will help improve the reliability of information presentation for making management decisions.

Generation of profit and loss statements by Syrian companies in the context of hyperinflation

Subject. This article deals with the issues related to the preparation of the Profit and Loss Statement by companies of the Syrian Arab Republic, taking into account consumer price indices in the context of hyperinflation, based on the provisions of IAS 29 – Financial Reporting in Hyperinflationary Economies. Objectives. The article aims to identify and find a solution to the problems of generating the Profit and Loss Statement, as well as develop appropriate methodological recommendations. Methods. For the study, we used observation, comparison, grouping, classification, generalization, and interpretation. Scientific works and publications of scientists on the theory of inflation and hyperinflation, the Central Bureau of Statistics (Syria) (CBS) data on consumer price indices, provisions of IAS 29 on the formation of reporting by organizations whose functional currency is the currency of the hyperinflationary economy, are the methodological basis of the study. Results. The article presents a test of the methodology for compiling the Profit and Loss Statement taking into account the recommendations of IAS 29 and shows the process of reporting using the materials of the Syrian Al-Ahlia Vegetable Oil Company. It also reads about the impact of hyperinflation on the items of the company's Profit and Loss Statement and its financial results, and compares the reporting data with indicators calculated on the basis of historical information. The article confirms the hypothesis that it is necessary to form a Profit and Loss Statement on the basis of the provisions of IAS 29 in the event of high inflation. Conclusions. In the context of hyperinflation, financial statements based on historical cost are unreliable, mislead users, and cause difficulties in making management decisions. A positive financial result determined through the historical cost principle, is a fictitious profit.

Türkiye'de Vergi Mevzuatı Ve Muhasebe Standartları Açısından Enflasyon Muhasebesi

Inflation is the level of prices increasing at a substantial rate over some time, thus requiring more money each year to buy a given amount of goods and services. Financial statements are instruments of an enterprise that show the financial situation and outcomes of functions. In high inflationary periods, if they are reported in the monetary unit of the identicalhyperinflationary economy they do not reflect the real financial situation and activity outcomes of an entity. Many arrangements have been made to prevent the negative effects of inflation on the presentation of financial tables in Turkey. The most important regulation to eliminate the impact of inflation on the financial statements is Tax Procedural Law No. 5024, the Law Amending the Income Tax Law, and Corporate Tax Law. In addition, The Public Oversight Organisation has published TAS 29 of Turkish Accounting Standards and Chapter 25 of Financial Reporting Standard for Large and Mediumsized Entities, Financial Reporting in Hyperinflationary Economies. In recent years, the inflation rate has remained at double-digit points in Turkey. In this study, inflation accounting is analyzed in terms of tax legislation and accounting standards and found that firstly, a prerequisite rate for application of the inflation adjustment is kept high and based only on The Turkish Statistical Institute'sdata, secondly the deficiencies in the tax legislation related to inflation accounting and finally mismatches between tax legislation and accounting standards. The aim of the study is to determine the deficiencies inthe legislation and practice related to inflation accounting and to propose solutions. In the study, a literature review was conducted.

Financial reporting in hyperinflationary economies and the value relevance of accounting amounts: hard evidence from Zimbabwe

We examine the value relevance of inflation-adjusted (IA) and historical cost (HC) amounts in a hyperinflationary economy. Using a unique dataset drawn from annual reports of firms listed on the Zimbabwe Stock Exchange from 2000 to 2005, we find that both sets of amounts are value relevant but HC amounts are superior to IA amounts. We also show that inflation gains and losses provide incremental information content beyond that provided by the HC amounts and that the power of this incremental content model is equivalent to that of the HC model but superior to that of the IA model. Further analyses indicate that, in periods of relatively low inflation, HC amounts are more value relevant, while in periods of relatively high inflation, the two sets of amounts are equally value relevant. Finally, we show that HC amounts have a greater ability to predict future cash flows than IA amounts, which suggests that the superiority of their value relevance stems from this.

Financial Reporting in Hyperinflationary Economies and the Value Relevance of Accounting Amounts: Hard Evidence From Zimbabwe

We examine the value relevance of inflation-adjusted (IA) and historical cost (HC) amounts in a hyperinflationary economy. Using a unique dataset drawn from annual reports of firms listed on the Zimbabwe Stock Exchange from 2000–2005, we find that both sets of amounts are value relevant but HC amounts are superior to IA amounts. We also show that inflation gains and losses provide incremental information content beyond that provided by the HC amounts and that the power of this incremental content model is equivalent to that of the HC model but superior to that of the IA model. Further analyses indicate that, in periods of relatively low inflation, HC amounts are more value relevant, while in periods of relatively high inflation, the two sets of amounts are equally value relevant. Finally, we show that HC amounts have a greater ability to predict future cash flows than IA amounts, which suggests that the superiority of their value relevance stems from this.

“Pusan at War: Refuge, Relief, and Resettlement in the Temporary Capital, 1950–1953”

This article examines the changes that the Korean War and influx of evacuees brought about in the temporary wartime capital at Pusan. It describes the two waves of in-migration into the city—the first following the outbreak of war on 25 June 1950 and the second after the Chinese People’s Volunteer Force occupied Seoul on 4 January 1951. While the first round of conflict brought some 200,000 evacuees to Pusan, mostly relatives of political and military families and the Seoul elite, the second ushered in an overwhelming half million displaced people, including over 100,000 refugees from North Korea. The rapid influx of a transient population exhausted public services and resources that the war already had diminished. The simultaneous development of a u.s. military complex in southeast Korea gave rise to rampant illegal trade and prostitution. Although schemes to continue wartime education testifies to the agency of evacuees to enact continuity in liminal spaces, only the elite could go to school without interruption in a devastated, aid-dependent, hyperinflationary economy. This article evaluates some characteristics of wartime Pusan—with privatized continuation of educational and religious institutions on one hand, and dependence on u.s. aid and military along with widespread prostitution and illegal trade on the other—to help explain why they remained salient features of the South Korean developmental state long after the armistice.

PREPARATION OF ACCOUNTING FINANCIAL REPORTING IN HYPERINFLATIONARY ECONOMIES

This article discusses some of the issues of preparation of accounting financialreporting in hyperinfl ationary economies, namely, adjustment factors, the purchasing power of money, the adjustment ofboth monetary and non-monetary indicators.

Dollars to Donuts

Dollars to Donuts

An Overview of the Economic Causes and Effects of Dollarisation: Case of Zimbabwe

Zimbabwe acquired its independence on 18 April 1980. Thereafter, its government introduced the currency known as the Zimbabwean dollar (ZW$) as an official currency, replacing the Rhodesian dollar in equivalence. At its inception, the Zimbabwean dollar had an exchange rate of one to 1.47 United States dollars (US$). However, according to Sikwila (2013:398), “by July 2008 its value had dropped to ZW$10 billion to 0.33 US$. This was fuelled by the substantial increase in money supply of ZW$20.5 trillion.” The increase led Zimbabwe to be the first hyperinflationary economy of the 21st century. This caused the abandonment of the ZW$ and the adoption of the US$ and other currency such as the Euro and the Rand. This paper discusses the various types of dollarisation before examining the causes and effects of adopting dollarisation as a way to eliminate hyperinflation, and the failure of the banking system to provide domestic currency to both firms and individuals. The paper is important to policymakers because it gives some recommendations on the subject in question, and suggestions for future research direction are indicated. DOI: 10.5901/mjss.2014.v5n7p69

Accounting for Hyperinflationary Economies

This paper discusses the accounting treatment under Hong Kong Financial Reporting Standards and Hong Kong Accounting Standards for hyperinflationary economies.

Multinational Banks Operating in Hyperinflationary Economies

Multinational Banks operate on a wider economic and geographical spectrum and are faced with vast challenges in each economic territory. There is however general observation that multinational banks do not make proper disclosures on portfolios operating in hyperinflationary economies as outlined in International Accounting Standard (IAS) 29. Consequently assets of multinational banks are overvalued due to lack of monitoring mechanisms in compliance with IAS 29. Bank regulators in various jurisdictions have daunted task to develop mechanisms of improving the financial sector through compliance with IAS 29.

AUDIT OF FINANCIAL REPORTS, BASED ON INTERNATIONAL ACCOUNTING STANDARDS

In this article are given main notion about international standard of financial reporting, order of the auditing on the base of IFRS, scheduling the report of the auditor, auditor conclusions and are given analysis of reporting based on the auditor procedures. At the audit of financial reporting are taken into account international standard to financial reporting 29 "Financial reporting in hyperinflationary economies".

IAS 29 and the cost of holding money under hyperinflationary conditions

Empirical evidence is presented on the efficacy of procedures summarised in IAS 29: Financial Reporting in Hyperinflationary Economies for estimating the loss in purchasing power from holding monetary items during hyperinflationary periods. Our empirical analysis encompasses 32 hyperinflationary economies covering a wide variety of hyperinflationary conditions and spanning a period of more than 80 years. While the estimation procedures summarised in IAS 29 perform poorly under all the hyperinflationary conditions encompassed by our sample, they are especially poor when the rate of inflation accelerates towards the end of a relatively short hyperinflationary period. For these latter economies, our best estimate of the actual purchasing power loss is typically only a small fraction of the figure obtained under the IAS 29 procedures. For hyperinflations of longer duration, the IAS 29 procedures return estimated purchasing power losses that are typically around 10% larger than our best estimate of the actual losses. We also derive and empirically test a general class of ‘two point’ estimation formulae that make more efficient use of the sparse information set on which the IAS 29 estimation procedures are based. The results obtained from this procedure are encouraging and suggest it is possible to obtain reliable estimates of purchasing power losses using only sparse information sets provided realistic assumptions are made about the way monetary holdings respond to variations in the purchasing power of the currency.

The use and perceived usefulness of IAS 29 restated financial statements by Zimbabwean investment analysts

International Accounting Standard 29 (IAS 29) (Financial Reporting in Hyperinflationary Economies) asserts that, in a hyperinflationary economy, financial statements “are useful only if they are expressed in terms of the measuring unit current at the balance sheet date” (International Accounting Standards Board (IASB), 2005:1259). In the context of the Zimbabwean economy, this study empirically investigates this assertion using a methodological triangulation comprising the protocol analysis (or process tracing) and the questionnaire techniques. Specifically, the investigation assesses the actual use and perceived usefulness of IAS 29 restated financial statements by Zimbabwean investment analysts with respect to the buy-hold-sell decisions. The empirical results indicate that at present, the Zimbabwean investment analysts make little or no use of hyperinflation-adjusted financial statements (HIAFSs) when making ordinary share investment decisions and perceive the information as “not useful”. This perception appears to be the critical reason why the analysts interviewed make little or no use of HIAFSs. Given this paradox, it appears that the need for further empirical research should be regarded as sine qua non if IAS 29 is to remain relevant in Zimbabwe and avoid suffering the same fate as its predecessors, IAS 6 and IAS 15. Further research should be conducted to provide sufficient evidence to enable the IASB and regulatory authorities in Zimbabwe to reassess the relevance of IAS 29.

Information and Communication Technologies: tools for development. What are the benefits and challenges for the African information society?

The article looks at Information Communication Technologies (ICTs), as being the probable answer to the problems associated with access to and use of information in the African context. It defines ICTs and demystifies the misconception that the term ICTs refers to computers and Internet only, the view that is believed to have rendered ICTs a not very urgent issue. ICTs are important as they enhance access to information, which is essential in any quest for development. The article also looks at the strengths of ICTs in accessing information. It then turns to the challenges of ICTs in an African setting, for example, training and the general acceptance of ICTs in a society with sections that are largely computer illiterate and too poor to purchase modern ICTs, a situation made worse by the hyper-inflationary Zimbabwean economy. Of concern in most African countries is the issue of the National ICT Policy. The article also highlights the issue, what should be part of the policy and looking at what other countries have included in their draft policies. The Zimbabwean Government has embarked on an extensive rural electrification programme. The article centres on this programme and the advantages it has brought to education and research. In conclusion, the article takes a position on whether ICTs are the much-anticipated tool for change and whether they are practical in an African rural setting or not. Recommendations are also brought forward with regards to what the National ICT Policy should address, such as training, and issues that can be tackled to make the society accept ICTs as a tool to eliminate poverty, human rights abuse and rectify gender disparity. Keywords : access to information, African information society system, Information Communication Technologies ESARBICA Journal Vol. 24 2005: 96-108

Acceptance and Observance of International Accounting Standards: An Empirical Study of Companies Claiming to Comply with IASs

This article reports on an empirical study of the accounting policies and disclosures of a sample of major companies from around the world claiming to comply with IASs in 1996. Specifically, the research addresses the extent of compliance with the IASs revised during the Comparability Project. The findings reveal significant noncompliance with IASs including: use of LCM for inventories; violation of the all-inclusive requirement for reporting profit/loss and of the strict definition of extraordinary items; failure to capitalize certain development costs; failure to provide all required disclosures for property, plant, and equipment, particularly those associated with revaluations; failure to comply with pension disclosure requirements; for companies operating in hyperinflationary economies, failure to restate foreign entities in accordance with IAS 29; and charging goodwill to reserves or amortizing goodwill over a period in excess of the 20 year limit. Noncompliance, as evidenced by the current research, is very problematic for the IASC as it strives to achieve an IOSCO endorsement and as IAS I Revised becomes effective for 1999 financial statements.

The Impact of a Hyperinflationary Economy on the Determination of Dumping

The Impact of a Hyperinflationary Economy on the Determination of Dumping