Research Publication: Accounting Implications of Rupee Devaluation, Inflation and Current Geo-Political Scenario

The current geo-political scenario across the world has given rise to disruption in global supply chain, rise/volatility in prices of crude oil and several commodities, disruption in capital markets, and foreign exchange volatility and so on. Several countries around the world are facing economic crisis and/or recessionary trend. It is important for business entities to consider the accounting and financial reporting implications resulting from the impact of these developments on their operations and activities.

In this research publication, we have endeavoured to present a summary of the key accounting aspects under both, the under Companies (Accounting Standards) Rules, 2021 (“I GAAP”) as well as Companies (Indian Accounting Standards) Rules, 2015 (“Ind AS”). In separate chapters, this research publication covers the financial reporting considerations of:

  • Current geo-political scenario
  • Devaluation in Indian Rupee and foreign exchange volatility
  • Rise in inflation
  • Key Disclosure Requirement in financial statements

Some of the key implications are:

  • Asset Impairment
  • Inventory valuation
  • Impact on Property, Plant & Equipment
  • Impact on Revenue Recognition and Penalties Related to Delays/Termination of Contracts
  • Expected Credit Loss Assessment under Ind AS 109
  • Impact on Subsidiaries, Associates or Joint Ventures in Affected Areas
  • Restricted Bank Balances
  • Foreign Exchange impact on Borrowings
  • Translation of Foreign Operations
  • Accounting for Forward Contracts and other Derivatives Contracts
  • Accounting Impact of Inflation
  • Employee Cost and Post-Employment Defined Benefit Cost
  • Fair Valuation
  • Estimation of Recoverable Amount for Impairment testing
  • Debt Covenants and Triggering of Events of Default
  • Disclosure as Material/Exceptional Event
  • Disclosure of Financial Instruments.

 

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