The Presidency of the Council of Ministers issued Resolution No. (1568) for the year 2022 this week to amend some provisions of the Egyptian accounting standards by adding Annex (B) to Egyptian Accounting Standard No. (13), which was amended in 2015, regarding the effects of changes in foreign exchange rates on companies’ budgets.
The amendment came with the aim of establishing a special optional accounting treatment to deal with the effects of the exceptional economic decision related to moving the exchange rate.
Mohamed Omran — Head of the Financial Regulatory Authority (FRA) — said that the treatment allows the facility to acquire fixed assets, real estate investments, intangible assets — except for goodwill — and exploration assets financed with foreign currency obligations.
Omran added that it recognises within the cost of those assets the currency differences resulting from the retranslation of the balance of the existing obligation related to it on the date of moving the exchange rate.
He pointed out that the treatment would allow the entity to recognise the debit and credit currency differences resulting from translating the balances of assets and liabilities of a monetary nature in foreign currencies existing at the date of moving the exchange rate within the items of other comprehensive income.
Omran also explained that the authority is keen to present a study to the Cabinet on the effects resulting from changes in the exchange rate on companies’ budgets in parallel with the economic slowdown in many economies of major countries in the past period, which led to a combination of high global prices for basic commodities, supply chain disruptions, and a rise in shipping prices.
This is in addition to the fluctuations in the financial markets in emerging countries, which resulted in the occurrence of inflationary pressures that affected the economies of many countries, including Egypt.
The head of the authority noted that as a result of moving the exchange rate, companies that have large commitment balances in foreign currency — whether short-term or long-term — were affected by the re-translation of these balances according to the exchange rate after moving it, and then a study was prepared to deal with these repercussions.