Por: EY Center for Board Matters
In recent years, there have been a number of events around the world, including geopolitical instability and conflicts, pandemics and natural disasters, that have led economic uncertainty that impacts entities globally. In turn, this raises many IFRS accounting considerations. Entities may be impacted by fluctuations in commodity prices, foreign exchange rates, restrictions to imports and exports, supply chain disruptions and possible slowdowns in global economies. Inflation rates and interest rates globally remain high.
Higher inflation has prompted central banks around the world to push up interest rates. Entities that have debt face increased borrowing costs and, potentially, higher refinancing costs in the future. Furthermore, many IFRS standards use discounting to account for the time value of money in measuring non-current assets and liabilities (for example, the fair value measurement of investment properties using discounted cash flows). When interest rates increase, the present value of those assets and liabilities will decrease. This may affect a number of areas of financial reporting, including impairment calculations, provisions, retirement obligations, leases, financial instruments and revalued tangible and intangible assets.
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