Question

Saud Bahwan Group has an established presence in fields like automotive, heavy vehicles,

construction equipment, special equipment’s, property and real estate, travel and tourism. Playing

a humble role in building a nation. They have well qualified technical, commercial and managerial

professionals grouped into specialized teams. The Saud Bahwan Group has come up into many

infrastructure and other projects with renowned partners inside and outside the country. In recent

times, Saud Bahwan Group have invested in Argentina, who are famous for rich natural resources,

export-oriented agricultural sector, and a diversified industrial base.

Sohail Bahwan Group (SBG) purchases several properties in Argentina for starting an industrial

unit. Over the last few years, the Argentina currency has been in double-digit inflation and in 2019,

inflation recorded at 54.4 %. SBG have to prepare their financial statement and record their

transactions for the property they owned

a. If SBG are preparing their financial statement, are they going to adjust the value of their

properties with the fluctuation of currency?

b. What benefits SBG will get if they record the same value of their property in their financial

statement? How the statement can be consistent, comparable, verifiable and reliable?

Answer 1

a. SGB has to prepare their financial statements as per International Financial Reporting Standards. As per the standard on effect of changes in exchange rates, SGB will have to account for the translation difference on account of changes in the exchange rate of Argentina Currency.

b. SGB by recording the same value of property will ensure the compliance of the respective accounting standards and principles. Further its shareholders will be able to get a true and fair view of the financial state of affairs of the business in Argentina. The translation adjustment on the property can be recorded in Other Comprehensive Income so that the financial statements can be consistent, comparable, verifiable and reliable.