Inconsistencies in application of IAS 29 and IAS 21 between foreign operation in hyperinflationary economy and consolidated financial statements of parent

This study involved a multinational entity listed on the Malawi Stock Exchange which adopted IAS 29 – Financial Reporting in Hyperinflationary Economy emanating from its foreign operation. The results of this study indicate that it is a rare phenomenon for effects of hyperinflation of a foreign operation to wipe out the entire group’s profit of a multinational entity operating in non-hyperinflation economy. Additionally, the results of this study show serious flaws in the consolidated financial statements as they failed to disclose the adverse audit report in the financial statements of the concerned foreign operation in hyperinflationary economy. There were material differences in the monetary losses between the foreign operation and the consolidated financial statements. Furthermore, impairment losses on investment in other entities of the foreign operation, investment properties and owner occupied assets were recognised in group accounts but not the concerned foreign operation