Balance Sheet - Inflation Accounting

Adjustment of balance sheet according to inflation accounting changes depending upon adjustment date. If adjustment transaction is performed on balance sheet date, only non-monetary items are adjusted.

If balance sheet is taken comparatively with another balance sheet, namely, if adjustment transaction will be performed based on another date instead of balance sheet date, all items are adjusted.

Report Filters

In order to list balance sheet values adjusted according to inflation, "Printing Restated Values: Yes/No" filter is used in balance sheet report filters. Filter default is "No".

If you approve this filter by selecting Yes option, "Calculation: Local/In FC" filter line must be selected as Local in order to print adjusted values.

Adjusted Balance Sheet Values

Balance sheet design is updated in order to list values adjusted according to inflation both in comparative and non- comparative balance sheets.

In order to list adjusted balance sheet values account transactions conforming to balance sheet period and "account amount" parameter value are adjusted one by one. Historical values (transaction value) in adjustment transaction are multiplied with a specific adjustment factor.

Adjustment factor is found with the following formula.

Adjustment factor = Balance sheet end month indices/transaction indices

Adjusted amount= Historical value * Adjustment value

Steps followed when taking balance sheet are detailed below with the help of adjustment factor:

1. When reporting period balance sheet,
Period balance sheet can be reported provided that "period" filter located in balance sheet report filters is not entered.

Monetary Accounts: Monetary accounts are not subjected to adjustment transaction since they are defined with their current values on balance sheet date. Thereby their adjustment factors are "1". So historical value and adjusted value of monetary accounts are the same.

Non-Monetary Accounts: The relevant transactions of the relevant non-monetary account are multiplied with adjustment factor. Adjusted amounts total shows adjusted balance of the relevant account.

Example:
Period: January 2002 - December 2002
Start Report Month: Opening
End Report Month: January 2003
2002 Consumer Price Indices

Transactions of account 100

(Monetary transactions are not assigned indices)
Transactions of account 150

• (5.157,40+5.289,50)/2=5.223,45
  • 1/Endeks = ((1/5223,45)*5,000,000)/5,000,000
    • (5.485,50+5.508,40)/2=5.496,95

      • 1/Indice= [((1/5223,)*15,000,000) + ((1/5496,95)*5,000,000)] /20,000,000
        Since account 100 is a monetary value, its historical balance will be the same with its adjusted balance.
        

        Code	Date	Historical Debt	Historical Credit	Adjustment Factor	Adjusted Debt	Adjusted Credit
        100	01.02.2002	100,000,000		1	100,000,000
        100	01.05.2002		40,000,000	1		40,000,000
        100	01.06.2002	10,000,000		1	10,000,000
        BALANCE	70,000,000			70,000,000

        
        Adjusted values of account 150 are as below:

        Code	Date	Historical Debt	Historical Credit	Adjustment Factor	Adjusted Debt	Adjusted Credit
        150	10.02.2002	20,000,000		1,14867*	29,734,000
        150	01.03.2002		5,000,000	1,14867**		5.743.350
        150	01.05.2002	10,000,000		1,09151***	10,915,100
        150	01.06.2002		20,000,000	1,13439****		22.687.800
        BALANCE	5,000,000			12.217.950

• 6000/5.223,45 = 1,14867
  • 6000/5.223,45 = 1,14867
    • 6000/5.496,95 = 1,09151
      • 6000/5.289,18 = 1,13439

1. When reporting comparative balance sheet,

Determining adjusted values of period balance sheet does not differ. However adjustment of previous period balance sheet is performed in two phases. The first phase includes adjusting previous period balance sheet according to end month of the relevant period. This course is performed in the same method with the adjustment of period balance sheet. Adjustment factor will be considered as "1" for monetary items; and for non-monetary items, adjusted amounts will be found with the help of indices. In this second phase, all balance sheet items which are adjusted according to their own period-end will be adjusted according to current period end-month.

Example 1:

First Period: January 2001- December 2001
Second Period: January 2002- December 2002
Start Report Month: Opening
End Report Month: January 2002
When you take a comparative report according to the filter above:

• January 2002 – December 2002 period is adjusted according to transaction steps in period balance sheet reporting. Adjustment factor for monetary values is considered as "1". For non-monetary values, indices of December are divided into transaction indices and factor acquired is multiplied with transaction amount, and adjustment transaction is performed.
• January 2001 – December 2001 period goes through two adjustment phases:

The first adjustment transaction is performed by adjusting balance sheet date values according to December 2001. This transaction is considered as 2001 period of the current period and it is the adjustment transaction of period balance sheet. So, only non-monetary values are adjusted. Historical values and adjusted values of the monetary values will be the same.

Adjusted item amounts found in the first step are subjected to a second adjustment transaction. This transaction will perform the adjustment of values, which are previously adjusted according to December, 2001, in accordance with December, 2002. Both monetary and non-monetary items will be subjected to the adjustment in this transaction. Adjustment factor will be the result of "December 2002 indices/December 2001 indices" transaction.

Example 2:

First Period: January 2001- December 2001
Second Period: January 2002- December 2002
Start Report Month: Opening
End Report Month: September 2002
When comparative report is taken according to the filter above,

• January 2002 – December 2002 period is adjusted according to transaction steps in period balance sheet reporting. Adjustment factor for monetary values is considered as "1". For non-monetary values, indices of September are divided into transaction indices. The result is multiplied with transaction amount and adjustment transaction is performed.
• January 2001 – December 2001 period goes through two adjustment phases:

The first adjustment transaction is performed by adjusting balance sheet date values according to December 2001.
Adjusted item amounts found in the first step are subjected to a second adjustment transaction with the help of adjustment factor (Adj. Factor: September 2002 indices/December 2001 indices).

Example 3:

Let's say that we are in December, 2003 considering adjusted breakdown of balance sheet report given above and we get a comparative balance sheet at the end of this period. In this case previous period will be January 2002 – December 2002. This balance sheet must be adjusted according to December, 2002 first, and then it must be adjusted according to December, 2003. In our example above, we calculated adjusted values of these two accounts according to December, 2002 period.

Let's say that WPI (Wholesale Price Index) in December, 2003 period is 7000.

After it is adjusted according to December, 2003 period, calculation of final adjusted values that will be reflected upon comparative balance sheet will be done as below:

December, 2003 Indices/December, 2002 Indices = 7000/6000 = 1,16667

Note: Adjusted values of non-monetary transactions for which no indices value is assigned will be equal to their historical values.

Adjusted Profit/Loss

Printing Restated Values: When this parameter is approved by selecting "Yes" option, added profit/loss item value will reflect difference of adjusted actives and passives totals.