BDO submits comment letter on IASB ED Translation to a Hyperinflationary Presentation Currency

BDO has submitted its comment letter to the IASB on Exposure Draft 2024/4 Translation to a Hyperinflationary Presentation Currency.
While BDO supports the objective of the IASB to propose a simple and cost-effective solution to the issue of translation of amounts from a functional currency that is the currency of a non-hyperinflationary economy to a presentation currency that is the currency of a hyperinflationary economy, BDO has expressed some concerns about the proposed translation method. These concerns include the following:
  • Often, little correlation is observed in practice between changes in general price indices and changes in exchange rates over the short term.
  • The proposed approach would involve applying the consolidation procedures again for comparative periods, which might involve significant costs for entities.
  • Applying the proposed approach, a difference would arise on elimination of intercompany transactions and balances as the results and financial position of the parent and the foreign operation are translated using two different approaches.
BDO believes that the proposed approach would work well for translation of an entity’s financial statements from the functional currency of a non-hyperinflationary economy to a presentation currency of a hyperinflationary economy. However, BDO believes that the proposed approach would be costly to apply and may not provide useful information in case of translation of a foreign operation with a functional currency of a non-hyperinflationary economy to a presentation currency of a hyperinflationary economy for purposes of consolidating the foreign operation.
The comment letter may be accessed here.