A dozen countries deemed “highly inflationary” for the purposes of accounting standards – Taxation of multinational companies

The Audit Quality Center, in a report published on August 20, reported 12 economies as potentially highly inflationary for purposes of US GAAP Accounting Standards Codification (ASC) 830, Foreign currency issues.

The Center for Audit Quality is an independent public policy body affiliated with the American Institute of CPAs. Its Inflation Watch Report is intended to help companies apply ASC 830 and monitor inflation statistics to determine the inflationary status of the countries in which they operate. The report is not authoritative and is not reviewed by the Financial Accounting Standards Board (FASB).

Similar calculation and reporting requirements for highly inflationary economies apply under International Accounting Standard IFRS (IAS) 29, Financial reporting in hyperinflationary economies.

Under ASC 830, economies are considered highly inflationary in all cases if their cumulative inflation rate for the three-year period preceding the base period exceeds 100%. If their cumulative inflation rate for the three-year period is less than 100%, additional factors must be taken into account in determining whether the economy should be considered highly inflationary.

Highly inflationary economies

The report identifies seven countries with three-year cumulative inflation rates greater than 100%: Argentina, Iran, Lebanon, South Sudan, Sudan, Venezuela and Zimbabwe.

Another country, Suriname, is expected to have a three-year cumulative inflation rate above 100% for the current year.

The report further noted that four countries had cumulative three-year inflation rates between 70% and 100% coupled with a recent significant increase (25% or more): Angola, Haiti, Liberia and Yemen. .

The Center for Audit Quality explains that the list of countries is compiled using data from the International Monetary Fund and that additional countries could be very inflationary but are excluded from the list due to lack of data. The report specifically emphasizes in this regard, by way of example, Syria.

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