Accounting Alert

This Accounting Alert is issued to circulate the IFRS alert regarding the December 2023 Hyperinflationary update where Ghana, Sierra Leone, and Haiti are now countries to be considered as hyperinflationary.

Executive Summary

According to the World Economic Outlook (WEO) report issued by the International Monetary Fund (IMF) in October 2023, and based on economic conditions that currently exist in Ghana, Sierra Leone, and Haiti, these countries are now considered to be hyperinflationary from 31 December 2023. Therefore, reporting entities in those countries will be required to apply IAS 29 'Financial Reporting in Hyperinflationary Economies'. Consequently, any entities with interim or annual financial reporting requirements on 31 December 2023 or thereafter should reflect IAS 29 in their IFRS financial statements.

Recapping the requirements of IAS 29

• Lists factors that indicate when an economy is hyperinflationary. One of the indicators of hyperinflation is if cumulative inflation over a three-year period approaches, or is more than 100 percent.
• Requires amounts in the statement of financial position that are not already expressed in terms of the measuring unit current at the end of the reporting period, are restated by applying a general price index.
• Sets out specific requirements on how to restate prior period comparatives. It requires corresponding figures for the previous reporting period to be restated by applying a general price index so that the comparative financial statements are presented in terms of the measuring unit current at the end of the reporting period.​
• This may result in the creation of additional temporary differences under IAS 12 ‘Income Taxes’. This is because the restatement of items under IAS 29 will often lead to adjustments to the carrying amounts of items without corresponding changes to their tax bases. Be mindful that IAS 12 requires these adjustments to be recognized in profit or loss.​
• Impairment testing should also not be overlooked. IAS 29 requires any restated non-monetary items to be reduced when it exceed its recoverable amount, even if those assets were not previously considered impaired under historical cost accounting. It will be important when preparing financial statements to consider whether the restatement of asset carrying values affects the results of impairment tests that were conducted in previous reporting periods and whether there are any indicators of impairment for assets that were not tested for impairment in previous periods.​

Any reporting entity considering IAS 29 for the first time will have to adapt its existing accounting systems to be able to process the hyperinflationary adjustments. They must understand the mechanics of adjusting for hyperinflation so they can restate in their financial statements both current and comparative periods.​

Please refer to the attached file for further details.