June 8, 2018

Discussion Document: Monitoring Inflation in Certain Countries, May 2018

May 16, 2018

In an effort to facilitate greater consistency, the CAQ International Practices Task Force (the "Task Force") developed a framework for compiling inflation data to assist registrants in monitoring inflation statistics in connection with their determination of the inflationary status of countries in which they have operations. The information herein may be helpful to management in applying ASC 830, in conjunction with its internal controls over financial reporting to reach a conclusion on whether a country’s economy should be considered highly-inflationary.

The Task Force compiled cumulative inflation data by country (for those countries for which the International Monetary Fund [IMF] publishes data), and then categorized the countries based on their cumulative inflation rates and the implementation guidance in ASC 830. (See the Appendix for a detailed description of how inflation rates are calculated.) In addition, the Task Force identified countries where projected cumulative inflation rates would have been categorized into categories considering the guidance in ASC 830 and in circumstances where there was not consistent reliable data, as follows:

1a. Countries with three-year cumulative inflation rates exceeding 100% (ASC 830, Case A)

1b. Countries with projected three-year cumulative inflation rates greater than 100%

2. Countries with three-year cumulative inflation rates exceeding 100% in recent years, but with three-year cumulative inflation rates between 70% and 100% in the most recent calendar year (ASC 830, Case B)

3. Countries with recent three-year cumulative inflation rates exceeding 100% after a spike in inflation in a discrete period (ASC 830, Case C)

4. Countries with three-year cumulative inflation rates between 70% and 100%, or with a significant (25% or more) increase in inflation during the last calendar year or a significant increase in projected inflation in the current year