Examination of inflation accounting in terms of TAS/TFRS, FRS for LMSE, MSUGT/VUK and example application

The comparability and reliability of financial reports are essential for business management, shareholders, investors, and other financial statement users in making informed decisions. However, during periods of high inflation, financial statement figures may fail to reflect economic reality, leading to a loss of meaningful information, reduced reliability, and diminished comparability. Globally, as high inflation became a persistent issue in the 1980s, historical cost-based accounting principles no longer accurately represented businesses' financial positions, necessitating an approach to incorporate inflation effects into financial reports. This study provides a comparative analysis of inflation accounting regulations under MSUGT/VUK and the standards outlined in TAS 29 and LMSE FRS Section 25, "Financial Reporting in Hyperinflationary Economies," with an illustrative application for each framework. While TAS 29 and LMSE FRS Section 25 align in many aspects, MSUGT/VUK diverges in terms of objectives, scope, general price index, financial statements subject to restatement, borrowing costs, and comparative financial information. The results indicate that restating the statement of profit or loss under these standards positively impacts operating results, yet differences in the general price index (CPI) used for adjustments and the measurement of certain non-monetary items based on current valuation models (such as fair value and revaluation model) result in a lower restated total asset amount compared to the existing system.