Ministry of investment authorizes companies to revalue their assets

In light of the fact that the Egyptian economy is facing a situation of hyperinflation during the current period, which has led to the weakness of the purchasing power of the currency – which has led to the preference of some to retain their wealth in the form of non-monetary assets or in relatively stable foreign currencies by investing the amounts held immediately in order to maintain its purchasing power in the face of repeated waves of inflation to hit the Egyptian economy. Therefore, only the addition of a new accounting standard (standard 51) was approved – a decision was issued to adopt it and apply it as of October 23, 2024-aimed at addressing the effects of hyperinflation, meaning a sharp decline in purchasing power :

* The sharp decline was determined by the characteristics of the economic environment surrounding the establishment in a particular country, but not limited to the change in prices and economic behaviors of dealers in the currency of this economy.

* This criterion does not specify an absolute rate at which a decrease in the purchasing power of a currency is considered a sharp decline.

* Price change over time is subject to political, economic and social factors, and here it is necessary to distinguish between two phenomena :

1. Changes in prices as a result of supply and demand that may lead to a decrease or increase in the prices of some goods independently .

2. Other factors in the economy that lead to changes in the general level of prices and a decrease in the purchasing power of money in general .

Due to the fact that the loss of purchasing power of money makes it difficult to compare the amounts resulting from transactions and events that differ at the time of their occurrence, they may even differ during the same financial period and have a misleading effect on the entity's financial statements

Therefore, it is necessary to amend the financial statements to reflect the impact of the decrease in the purchasing power of money, and this does not violate the principle of historical cost in the presentation of the statements, but it is considered an extension of it. The usefulness of the standard:-

1. Provide comparable financial information in the statements.

2. Provide tools for decision-making by management that are based on accurate financial information.

3. The possibility of comparing the lists of the financial institution with the financial statements of other companies in the same activity in other countries.

Standard 51 financial statements in the economics of hyperinflation

* As of the date of issuance of this standard (23-10-2024), this standard is applied to companies from the beginning of the financial period in which a sharp decrease in purchasing power in the registration process is determined.

* The application of the standard for the first time does not require the preparation of an opening financial position for the presented comparison period .

* The comparative figures presented in the financial statements are adjusted as a result of the application of this standard.

* Use personal judgment to determine if the currency of the restriction is experiencing a sharp decline in purchasing power .

* It is not allowed to apply this standard as a supplement to the financial statements and it is also not allowed to submit financial statements separately before the amendment.

* Since the application of the standard depends on the use of personal judgment (as already mentioned), it is acceptable that the results of this personal judgment are not highly accurate, but the procedures followed in the personal judgment must be substantially sound to ensure a reasonable degree of accuracy in the reassessment of financial statements .

* Applies to all financial statements whether (single-independent-combined)

* It applies to all establishments that suffer from a sharp decrease in the purchasing power of the registration process, in addition to any subsidiaries, branches or sister companies.

In the event of a sharp decrease in the purchasing power of the currency of the registration, the entity must amend the company's financial statements and prove these profits or losses resulting from the amendment process in the company's income statement and disclose them separately – they must also be presented in a separate item within equity and not be added to the carried profit and loss at the end of the period. This is done through the following procedures:

1-determining the general price index so that (it is appropriate – to be updated periodically-to be unified-to verify the sources of its data)

2- Amendment of the list of financial position and property rights.

3-.Adjustment of comparative lists (they must be revalued at current value).

4-The list of property rights will be amended, with the exception of interim profits and any previous revaluation Surpluses, as they will be canceled and a general price index will be applied from the date of recognition .

5-The Income Statement and comprehensive income are adjusted according to the general price index .

6-The list of rendering flows is adjusted according to the current measurement unit.

7-the difference resulting from the adjustment of non-monetary assets and equity is included in the statement of comprehensive income and the deferred tax is calculated in full on the temporary differences resulting from the adjustment of non-monetary assets and liabilities. Which items should be adjusted in the financial statements: – these items of a non-monetary nature (measured at historical cost or cost minus depreciation, amortization or impairment), taking into account that no items of a non-monetary nature measured at fair cost should be adjusted. - All items of a monetary nature are not modified, such as (cash held-any items will be collected or paid in cash).

- No terms and conditions related to price changes will be amended because they will be evaluated in accordance with the agreement .

In case there are no detailed records of the acquisition dates of some fixed assets, it may be necessary to use an independent professional evaluation of the elements as a basis for their adjustment, the first application of this standard, provided that this is done through experts specialized in valuation among those registered in the Register of revaluation of assets at the EFSA. The case of the end of a sharp decline in the purchasing power of the currency: when the currency ceases to be suffering from a sharp decline in purchasing power and the entity ceases to prepare and present financial statements in accordance with this criterion ...it should be considered that the amounts and values expressed at the end of the period are the basis for the Subsequent lists

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