Registrants are responsible for monitoring inflation in countries in which they have operations. Under U.S. GAAP (ASC 830), the determination of a highly inflationary economy begins by calculating the cumulative inflation rate for the three-year period that precedes the beginning of the reporting period, including interim reporting periods. If that calculation results in a cumulative inflation rate in excess of 100%, the economy should be considered highly-inflationary in all instances. However, if that calculation results in the cumulative rate being less than 100%, historical inflation rate trends and other pertinent factors should be considered to determine whether such information suggests that classification of the economy as highly inflationary is appropriate. Registrants should be especially prudent when monitoring inflation data in countries where there is a concern about the reliability of the inflation data. Additionally, significant professional judgment is required when determining if there is sufficient evidence to conclude the country should no longer be classified as highly inflationary.

In an effort to facilitate greater consistency, the CAQ International Practices Task Force (the "Task Force") developed a framework for compiling inflation data to assist registrants in monitoring inflation statistics in connection with their determination of the inflationary status of countries in which they have operations. The information herein may be helpful to management in applying ASC 830, in conjunction with its internal controls over financial reporting to reach a conclusion on whether a country's economy should be considered highly-inflationary.

The Task Force compiled cumulative inflation data by country (for those countries for which the International Monetary Fund [IMF] publishes data), and then categorized the countries based on their cumulative inflation rates and the implementation guidance in ASC 830. (See the Appendix for a detailed description of how inflation rates are calculated.) In addition, the Task Force identified countries where projected cumulative inflation rates would have been categorized into categories considering the guidance in ASC 830 and in circumstances where there was not consistent reliable data, as follows:

There may be additional countries with three-year cumulative inflation rates exceeding 100% or that should be monitored which are not included in the below analysis because the sources used to compile this list do not include inflation data for all countries or current inflation data. One such country, for example, is Syria. Numerous other countries that are not members of the IMF are not included in the WEO Reports.

The data referred to herein is derived from the IMF World Economic Outlook Report Database – April 2018 (“IMF WEO Report”), unless otherwise indicated. The IMF WEO Report presents inflation data on a calendar year basis. Data presented in the IMF WEO Report as estimated is identified with an “E.”

While the below data may be a useful resource for registrants, management should have adequate controls to independently verify and analyze any data on which they are basing a conclusion about an economy’s highly inflationary status.

Below is a discussion of the countries included in each of the above categories.

According to data obtained from the IMF WEO Report, the following countries have projected three-year cumulative inflation rates greater than 100% but have not yet exceeded 100% as of the most recent year-end and any subsequent monthly data available as of the meeting date. Under ASC 830-10-45-12, an economy must be classified as highly inflationary when the cumulative three-year rate exceeds 100%. However, if that calculation results in the cumulative rate being less than 100 percent, historical inflation rate trends (increasing or decreasing) and other pertinent economic factors should be considered to determine whether such information suggests that classification of the economy as highly inflationary is appropriate sooner. ASC 830-10-45-13 states that the definition of a highly inflationary economy is necessarily an arbitrary decision requiring judgment and in some instances, the trend of inflation might be as important as the absolute rate.

Registrants should have appropriate controls in place to monitor more current reported inflation data and consider other pertinent economic indicators to determine if and when the following countries should be considered highly inflationary:

As a result of the above, the Task Force is unable to calculate the actual cumulative three-year rate at the end of 2017 and the projected amount at the end of 2018; however, based on the projected indices reported in the WEO Report, the calculated projected cumulative three-year inflation amounts to 106% at the end of 2017. While there is insufficient data reported in the WEO Report to determine the actual cumulative three-year rate at the end of 2017 or a projection for 2018, the Task Force believes that the 2017 projection in combination with the actual annual inflation rate for 2017 and considering the 2018 annual inflation projection presented in the WEO Report, would still indicate a 2018 projected three-year cumulative rate in excess of 100%.

The three-year cumulative inflation rates presented below were not reported in the April 2018 IMF WEO Report, but were calculated based on monthly amounts from various indices published by the National Institute of Statistics and Census of Argentina (INDEC), as follows:

The WPI is included for consideration for the following reasons:

► Concerns about the accuracy and consistency of published CPI data,

► The CPI data is not a national average for all periods, and

► The WPI has consistently provided national coverage and historically has been viewed as the most relevant and reliable inflation measure by practitioners since Argentina moved to International Financial Reporting Standards (IFRS).

In the recent months, and in particular in April 2018, there have been reported economic events impacting the Argentinean economy, such as significant depreciation of the Argentine peso (e.g., from 20 pesos/$ in early April 2018 to 24 pesos/$ in mid-May 2018). The Central Bank of Argentina increased interest rates to 40%. The Argentine government has requested financial assistance from the IMF that is being negotiated.

The three-year cumulative inflation rates using the combination of monthly indices published by INDEC that are presented in the table above in “Alternative calculations” as of April 30, 2018 amounts to: combination of CPI indices #1 – 116%; combination of CPI indices #2 – 114%; WPI #3 – 97%.

The IMF WEO Report does not include actual inflation data for the Democratic Republic of Congo for 2017. This fact, in combination with the significant change in rates from 2014 and 2015 to 2016, indicates that determining if prior year inflation data is reliable may be subject to significant professional judgment. As such, registrants with material operations in this country should consider additional available information in making their judgment.

The IMF WEO Report does not include actual historical inflation data for Yemen, which indicates the reliability of the data may be subject to significant professional judgment. As such, registrants with material operations in this country should consider additional available information in making their judgment.

For all countries, data is extracted from the International Monetary Fund (“IMF”) website. IMF data is extracted from www.imf.org as follows:

► On the home page, select the “Data” tab, and then click “World Economic Outlook Databases” link.

► Select “By Countries (country-level data)”.

► Select “All Countries”, then click the “continue” button.

► Under the “Monetary” subject header, select “Inflation”, “end of period consumer prices” (both the index and percent change); then click the “continue” button.

The IMF World Economic Outlook (WEO) report estimates inflation when actual inflation data has not been obtained. The text of the report describes the assumptions and conventions used for the projections in the WEO. The data that are estimated are highlighted. While the IMF data has limitations (projected inflation data and varying dates through which actual data is included in the table), the calculated three-year cumulative inflation allows us to determine which country’s calculations require further analysis.

Note: From time to time the WEO refines or updates previously reported actual Consumer Price Index (herein referred to as “Index” or “CPI”) data for certain countries.

Using the downloaded table, the three-year cumulative inflation rate is calculated as follows (assuming the current year is end of year 2017): (2017 End of Year CPI – 2014 End of Year CPI) / 2014 End of Year CPI.

It should be noted that the IMF inflation data used to summarize inflation could be different from the inflation data reported by the respective countries’ central banks or governments. The Task Force has not performed procedures to identify any potential differences. Accordingly, this summarized IMF information should be supplemented, to the extent considered necessary, with other pertinent information that may be available.

For registrants that need additional information to monitor inflation for operations in certain countries, it should be noted that annual or month-end CPI information can be obtained from some countries’ central bank or government websites or other publicly available information but that data may differ from the inflation data reported by the IMF and may need to be converted because of differences in presentation or other reasons (for example, some countries have reset their base index back to 100 during recent years). While inflation data published by a central bank or government is often more current than the IMF data, each country releases its inflation data at different times and inflation data for some countries may not be otherwise publicly available.

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