Argentina and Turkey accounted for as hyperinflationary economies

Associated British Foods plc – Annual report – 16 September 2023

Industry: food and drink, retail

Significant accounting policies (extract)

 Hyperinflation

The Argentinian economy was designated hyperinflationary from 1 July 2018. The Turkish economy was designated hyperinflationary from 1 July 2022.

The Group has applied IAS 29 Financial Reporting in Hyperinflationary Economies to its Argentinian operations from the beginning of the 2019 financial year and for its Turkish operations from the beginning of the 2022 financial year. IAS 29 requires that hyperinflationary adjustments are reflected from the start of the reporting period in which it is applied. For the Group’s Argentinian operations this was 1 September 2018, and for the Group’s Turkish operations this was 1 September 2021.

The adjustments required by IAS 29 are set out below:

  • adjustment of historical cost non-monetary assets and liabilities from their date of initial recognition to the balance sheet date to reflect the changes in purchasing power of the currency caused by inflation, according to the official indices for Argentina published by the Federación Argentina de Consejos Profesionales de Ciencias Económicas (‘FACPCE’) and for Turkey published by Turkish Statistical Institute (‘TUIK’);
  • adjustment of the components of the income statement and cash flow statement for the inflation index since their generation, with a balancing entry in the income statement and a reconciling item in the cash flow statement, respectively;
  • adjustment of the income statement to reflect the impact of inflation on holding monetary assets and liabilities in local currency;
  • the financial statements of the Group’s Argentinian and Turkish operations have been translated into sterling at the closing exchange rate at 16 September 2023 (ARS 433.88:£1; TRL 33.45:£1); and
  • the cumulative impact corresponding to previous years has been reflected in other comprehensive income in the year.

In Argentina, the FACPCE index was 911.1316 at 31 August 2022 and 2044.2832 at 31 August 2023. The inflation index for the year is therefore 2.244.

In Turkey, the TUIK index was 80.21 at 31 August 2022 and 58.94 at 31 August 2023. The inflation index for the year is therefore 0.735.

The Venezuelan economy has been designated hyperinflationary for a number of years, but the impact on the Group’s results remains immaterial.

2023 Consolidated cash flow statement (extract)

for the 52 weeks ended 16 September 2023

2. Operating costs (extract)