Dr. Mostafa Madbouly, Prime Minister, issued a decision to amend some provisions of the Egyptian Accounting Standards to extend the time frame for applying Appendix (C) accompanying the Egyptian Accounting Standard No. (13), amended in 2015, regarding the effects of changes in foreign exchange rates on the companies’ business results. Until the end of December 2023, by developing optional and temporary accounting treatments to deal with the effects of the exceptional economic decision related to moving the exchange rate.
Enable companies to deal with the effects of changes in exchange rates
The new decision allows companies to perform optional and temporary accounting treatment to deal with the effects of changes in foreign exchange rates, until December 31, 2023.
According to the decision, the financial period for applying the special accounting treatment mentioned in this appendix is the fiscal year or period that begins before the date of October 27, 2022, which is the date of moving the exchange rate, and ends on or after this date and the following fiscal period or year.
It is worth noting that the accounting treatment, in accordance with the provisions of Appendix C, came to help the various entities to reclassify the losses resulting from the currency exchange differences according to the decisions related to the movement of the currency exchange rate, in a way that relieves pressure on their financial statements, the results of their operations and their ownership rights.
Financial control proposal to amend the Egyptian accounting standards
The decision came after the Financial Supervisory Authority submitted to the Prime Minister a proposal to amend some provisions of the Egyptian Accounting Standards regarding extending the time frame for the work of Appendix C, which regulates how to deal with the effects of moving foreign exchange rates, allowing companies that have existing obligations in foreign currency linked to acquired assets. Before moving the exchange rate and still exists and works in the facility, currency differences are recognized and re-evaluated, in light of the difficult economic conditions globally, which caused a combination of high food and fuel prices, disruption of supply chains and high shipping costs, which resulted in inflationary pressures that affected the economies of many countries. Including Egypt.
Where the philosophy of the amendment revolves around enabling companies that acquired assets in foreign currencies before the unusual exchange rate movements and there are still financing obligations on this asset to capitalize the losses of the currency differences on those assets and record them in their financial statements in the assets, in order to mitigate the severity of the impact of the exchange rate differences on the results of its business. annual and financial indicators.
Allow processing before the date of moving the exchange rate
Appendix C provides an accounting treatment for the entity that, prior to the date of the exchange rate movement, acquired fixed assets, real estate investments, intangible assets (excluding goodwill), exploration and evaluation assets, and/or usufruct assets for lease contracts, funded by existing obligations On that date in foreign currencies, to recognize within the cost of those assets the debit currency differences resulting from the settled portion of these liabilities during the financial period to apply this special accounting treatment, in addition to the currency difference resulting from translating the remaining balance of these liabilities at the end of December 31, 2023 or At the end of the closing date of the financial statements for the financial period to apply this special accounting treatment.
Recognition within the comprehensive income of net currency differences
The new amendments also allow the facility to recognize within the items of comprehensive income the net debit and credit currency differences achieved during the period, in addition to the differences resulting from retranslating the balances of items of a monetary nature existing at the end of December 31, 2023.
Mohamed Farid: Proof of funded assets before the exchange rate moves
For his part, Dr. Mohamed Farid, Chairman of the Board of Directors of the Financial Regulatory Authority, said that the new annex is an exceptional and temporary accounting treatment that helps companies absorb the effects of the exchange rate movement on their assets that they financed before the decision in foreign currencies, which reduces pressure on the income statement.
Dr. Farid continued, that the accounting treatment according to Appendix C aims to prove the assets financed before the exchange rate move and financed in foreign currencies at their value that matches the amount of change in the exchange rate, which allows companies to avoid including in their financial statements losses resulting only from currency exchange rate differences due to the decision to move the exchange rate. Exchange.
It is worth noting that the Board of Directors of the Financial Regulatory Authority, in light of its keenness to facilitate the companies listed on the Egyptian Stock Exchange and the entities licensed to engage in non-banking financial activities, and in light of economic changes, has issued, headed by Dr. Mohamed Farid, Resolution No. 96 of 2023 regarding extending the period for submitting financial statements. Periodicals for companies whose securities or financial instruments are listed on the Egyptian Stock Exchange and entities subject to the Authority’s supervision and control
According to the first article of this decision, companies whose securities or financial instruments are listed on the Egyptian Stock Exchange and entities subject to the supervision and control of the Authority are allowed to submit periodic financial statements for the financial period ending on March 31, 2023, no later than May 30, 2023.
