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PwC hosts webinar on ‘Hyperinflationary Accounting Implications’

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PwC recently held a webinar on Hyperinflationary Accounting Implications for Financial Reporting in Colombo.

Hyperinflation is very high and typically accelerating inflation that erodes the real value of the local currency, as prices of goods and services increase.

The core consideration of the discussion was whether Sri Lanka meets the accounting definition of a hyperinflation economy consequent to the pandemic effects exacerbated by the sheer magnitude of economic turbulence. It was noted that the financial year ending December 2022, cannot be termed as a hyperinflationary economy, whereas the financial years ending March 2023 and beyond, will need to be viewed through this lens and decided.

As such, close monitoring of the economy is needed to understand whether Sri Lanka is moving towards hyperinflationary status.

Regulatory bodies should prepare in advance and assess the impact LKAS 29 Financial Reporting in Hyperinflationary Economies will have on various areas of regulatory supervision.They should take cognizant of certain qualitative factors required to be evaluated in making a final decision on whether the economy has moved into hyperinflation. The panel highlighted that corporate management and Boards of Directors need to be aware of the impact of rising inflation on budgets, targets and performance evaluations within the entities. The panel also emphasized that decisions taken disregarding extreme levels of inflation could lead to wrong conclusions and business failures.

Aimed at Chairmen, CEOs, MDs, Finance Controllers, Board Directors, Audit Committees and Finance Managers, the webinar focused on how corporates should be prepared to apply LKAS29 within a very short period,if Sri Lanka is determined to be hyperinflationary and plan ahead, train staff and embed LKAS 29 in the organization.

Flavia Maslaton said, “It is important to consider the adjustments needed for internal reports such as budgets and KPIs in a hyperinflationary situation and focus on early awareness and training of staff. It is critical to start preparing with the detailed information early and quantify the effects of applying LKAS 29 for the first time. Companies should also consider enhancements needed to their IT and accounting systems to facilitate some of the complex calculations needed.

Sergio Cravero noted, “At board level, it’s crucial to understand the pervasive impact of macroeconomic variables including inflation, on an organization’s businesses and its governance.

“It is important for corporates to engage early with the tax authorities through their respective trade associations or Chambers, to have consensus on how inflationary accounting adjustments will be treated in tax computations. Entities operating in regulated industries such as Banking, Insurance should engage with the Regulators to assess regulatory impacts including regulatory reporting implications”, added Malinda Boyagoda

The webinar overall empowered top-tier management and financial experts to weather the headwinds they may experience in the financial reporting for the year ending March 2023.

 

Wednesday, February 8, 2023 – 01:00











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