Dozen countries deemed ‘highly inflationary’ for accounting standard purposes

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

The Center for Audit Quality is an autonomous public policy organization affiliated with the American Institute of CPAs. Its inflation monitoring report is intended to assist companies in applying ASC 830 and monitoring inflation statistics to determine inflationary status of countries in which they have operations. 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 IFRS International Accounting Standard (IAS) 29, Financial Reporting in Hyperinflationary Economies.

Under ASC 830, economies are considered highly inflationary in all instances if their cumulative inflation rate for the three-year period preceding the reporting period exceeds 100%. If their cumulative inflation rate for the three-year period is less than 100%, additional factors must be considered to determine if the economy should be deemed highly inflationary.

Highly inflationary economies

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

One additional country, Suriname, was projected to have three-year cumulative inflation rate exceeding 100% in the current year.

The report further noted that four countries had three-year cumulative inflation rates between 70%–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 complied using International Monetary Fund data and that additional countries could be highly inflationary but are excluded from the list due to lack of data. The report specifically highlights in this respect, as an example, Syria.