A new decision from the government regarding exchange rate in the Egyptian accounting standards
A new Prime Ministerial Decree No. 1847 of 2023 revising the exchange rate of the Egyptian Accounting Standards was published in the Official Gazette.
The decision to amend some provisions of the Egyptian Accounting Standards provided in its first article that it be replaced by the texts of paragraphs 5/c, 7, and 9 of Appendix C, which is an appendix to Egyptian Accounting Standard No. 13 on “The Effects of Changes in Foreign Currency Exchange Rates,” which were added by Prime Minister’s Decision No. 4706 of 2022 and referred to, the following texts:
In paragraph 5C
It is stated what fiscal year to use the specific accounting procedure described in this appendix: It is the fiscal year or period that starts before the exchange rate adjustment date of October 27, 2022 and finishes on or after this date, as well as the subsequent fiscal period or year.
Exchange Rate
An establishment that, prior to the date of the change in the exchange rate, may purchase fixed assets, real estate investments, assets for exploration and evaluation, intangibles other than goodwill, and usufruct assets for lease contracts, funded by outstanding debt on the date of the change in the exchange rate.
Applying this special accounting treatment requires that, in foreign currencies, in addition to the currency difference resulting from translating the remaining balance of these obligations at the end of December 31, 2023 or at the end of December 31, 2023, debit currency differences resulting from the settled portion of these obligations during the financial period be recognized within the cost of those assets.
The financial statement must utilize the exchange rate in effect on the day of the financial statements’ closing date to apply this unique accounting treatment, and the facility may do so independently for each asset.
Foreign exchange rates
In accordance with paragraph 9 of the amended Egyptian Accounting Standard No. 12, “Effects of Changes in Foreign Exchange Rates,” an entity whose business results were impacted by net profits or losses of currency differences as a result of shifting the exchange rate of foreign currencies, whether it is a currency exchange or not, may do so without complying with paragraph 28’s requirements.
The Egyptian pound or any other foreign currency is entered along with it to recognize the net differences between the debit and credit currencies realized during the period under the items of other comprehensive income.
Using the exchange rate in effect on the date in question, less any currency translation differences that were made, and in addition to the differences resulting from retranslating the balances of monetary items that existed at the end of December 31, 2023 or at the end of the closing date of the financial statements for the financial period to apply this special accounting treatment.
Given that the abnormal exchange rate movements were primarily responsible for these disparities, they should be recognized within the cost of assets in accordance with paragraph 7 of this appendix.
According to Article 2, this decision must be published in the Official Gazette and will take effect the day after it is published.