While Saudi Arabia is not currently classified as hyperinflationary, these updates are highly relevant to Saudi entities with operations, subsidiaries, joint ventures, or financial interests in the affected countries. Saudi businesses with exposure to these economies should carefully consider their financial reporting obligations, particularly when preparing consolidated financial statements or transacting with entities operating in hyperinflationary environments.
Key Changes from 30 June 2025:
- Burundi is now considered hyperinflationary, with a three-year cumulative inflation rate exceeding 100%.
- Ethiopia and Yemen are no longer classified as hyperinflationary as of June 2025, due to sustained declines in inflation.
- The countries currently requiring the application of IAS 29 now include: Argentina, Burundi, Ghana, Haiti, Iran, Lao PDR, Lebanon, Malawi, Sierra Leone, South Sudan, Sudan, Suriname, Turkey, Venezuela, and Zimbabwe (until April 2024).
- Monitored Countries: Angola, Egypt, Myanmar, and Nigeria are being closely observed and may become hyperinflationary in future reporting periods.
Saudi businesses with exposure to these countries should remain vigilant, particularly regarding:
- Egypt and Nigeria: Key trading and investment partners for many Saudi businesses.
- Lebanon, Iran, and Turkey: Countries where Saudi entities may have indirect financial exposure.
Practical Implications for Saudi Entities
Even though the Saudi economy is currently stable and not impacted directly, companies operating in Saudi Arabia should consider:
- Whether they control, significantly influence, or have financial interests in entities located in hyperinflationary economies.
- Whether intercompany balances, transactions, or investments are denominated in currencies of hyperinflationary countries.
- The impact on group consolidation, impairment testing, and foreign currency translation when dealing with affected subsidiaries or joint ventures.
Recap of IAS 29 Requirements
IAS 29 must be applied when an entity’s functional currency is that of a hyperinflationary economy. Key requirements include:
- Restatement of non-monetary items using a general price index.
- Adjustments to prior period comparatives.
- Re-assessment of impairment testing based on restated asset values.
- Potential creation of additional temporary differences under IAS 12 (Income Taxes).
IAS 29 is complex to implement, particularly when it affects consolidated reporting across different jurisdictions. Companies must ensure they have appropriate systems in place to process these restatements accurately.
Relevant IFRIC Guidance
The IFRS Interpretations Committee (IFRIC) has previously addressed several hyperinflation-related issues:
- Translating foreign operations in hyperinflationary economies.
- Accounting for cumulative exchange differences prior to hyperinflation classification.
- Presenting comparatives when hyperinflation is first identified.
These interpretations are particularly important for Saudi-based groups consolidating foreign operations.
Saudi Arabia Perspective
At Aldar Audit Bureau, Grant Thornton, we encourage all Saudi businesses with cross-border operations to:
- Proactively assess whether their group structures, associates, or transactions expose them to hyperinflationary accounting requirements.
- Prepare early by engaging with professional advisors to develop appropriate reporting systems and policies for hyperinflation adjustments.
- Monitor emerging inflation trends in key regional markets, including Egypt and Nigeria, where potential future reclassification could have significant financial reporting implications.
IAS 29 cannot be quickly implemented. It requires thoughtful planning, system readiness, and professional judgment, particularly in multi-national or complex group structures.
Our experts are available to support you in assessing your exposure and preparing for the financial reporting requirements associated with hyperinflationary economies. To discuss this alert further, please contact Shahzada Saleem
