𝗨𝗻𝗱𝗲𝗿𝘀𝘁𝗮𝗻𝗱𝗶𝗻𝗴 𝗙𝗥𝗖’𝘀 𝗣𝗼𝘀𝗶𝘁𝗶𝗼𝗻 𝗼𝗻 𝗜𝗔𝗦 𝟮𝟵 𝗮𝗻𝗱 𝗡𝗶𝗴𝗲𝗿𝗶𝗮’𝘀 𝗘𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝗟𝗮𝗻𝗱𝘀𝗰𝗮𝗽𝗲

Should Nigeria apply IAS 29 in the preparation of financial statements for the 2025 Financial year?

This is to inform you that the FINANCIAL REPORTING COUNCIL OF NIGERIA has published its position paper on the applicability of IAS 29 - Financial Reporting in Hyperinflationary Economies in Nigeria.

Below is a summary of the FRC analysis, IAS 29 outlines five primary indicators to determine hyperinflation. Here’s how Nigeria fared:

𝗣𝗮𝗿𝗮𝗴𝗿𝗮𝗽𝗵 𝗼𝗳 𝗜𝗔𝗦 𝟮𝟵 - 𝟯(𝗮) 𝗙𝗮𝗰𝘁𝗼𝗿
The general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency. Amounts of local currency held are immediately invested to maintain purchasing power; 𝗖𝗼𝗻𝗰𝗹𝘂𝘀𝗶𝗼𝗻 - 𝗡𝗼𝘁 𝗺𝗲𝘁.

𝗣𝗮𝗿𝗮𝗴𝗿𝗮𝗽𝗵 𝗼𝗳 𝗜𝗔𝗦 𝟮𝟵 - 𝟯(b) 𝗙𝗮𝗰𝘁𝗼𝗿
The general population regards monetary amounts not in terms of the local currency but in terms of a relatively stable foreign currency. Prices may be quoted in that currency; 𝗖𝗼𝗻𝗰𝗹𝘂𝘀𝗶𝗼𝗻 - 𝗡𝗼𝘁 𝗺𝗲𝘁.

𝗣𝗮𝗿𝗮𝗴𝗿𝗮𝗽𝗵 𝗼𝗳 𝗜𝗔𝗦 𝟮𝟵 - 𝟯(c) 𝗙𝗮𝗰𝘁𝗼𝗿
Sales and purchases on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even if the period is short; 𝗖𝗼𝗻𝗰𝗹𝘂𝘀𝗶𝗼𝗻 - 𝗡𝗼𝘁 𝗺𝗲𝘁.

𝗣𝗮𝗿𝗮𝗴𝗿𝗮𝗽𝗵 𝗼𝗳 𝗜𝗔𝗦 𝟮𝟵 - 𝟯(d) 𝗙𝗮𝗰𝘁𝗼𝗿
Interest rates, wages and prices are linked to a price index; - 𝗖𝗼𝗻𝗰𝗹𝘂𝘀𝗶𝗼𝗻 - 𝗡𝗼𝘁 𝗺𝗲𝘁. Wages and prices in Nigeria are not consistently tied to a price index. While interest rates have been adjusted to combat inflation, they do not reflect index-linking patterns.

𝗣𝗮𝗿𝗮𝗴𝗿𝗮𝗽𝗵 𝗼𝗳 𝗜𝗔𝗦 𝟮𝟵 - 𝟯(e) 𝗙𝗮𝗰𝘁𝗼𝗿
Cumulative Three-Year Inflation Rate: Nigeria’s three-year cumulative inflation rate of 110.9% exceeds the IAS 29 threshold of 100%. However, this alone does not classify the country as hyperinflationary without supporting evidence from other indicators. 𝗖𝗼𝗻𝗰𝗹𝘂𝘀𝗶𝗼𝗻 - 𝗺𝗲𝘁

𝗙𝗥𝗖 𝗖𝗼𝗻𝗰𝗹𝘂𝘀𝗶𝗼𝗻
The FRC indicated that determining hyperinflation requires significant judgement and consideration of all relevant indicators. After thorough analysis of the above indicators, the FRC concludes that Nigeria is not yet a hyperinflationary economy. Therefore, IAS 29 should not be applied in the preparation of financial statements for the 2025 Financial year. The FRC will continue to monitor economic developments and update this position when necessary.

For more details, please click here to read the Press Release: https://lnkd.in/dZVwiscx