Inflation in Venezuela – 2012 & 2011
|
|
Monthly
|
Annualized
|
|
|
INPC
|
Monthly
|
Annualized
|
2012
|
(2007=100)
|
Variation
|
Variation
|
|
2011
|
(2007=100)
|
Variation
|
Variation
|
Jan
|
269,6
|
1,5%
|
26,0%
|
|
Jan
|
213.9
|
2.7%
|
28.4%
|
Feb
|
272,6
|
1,1%
|
25,3%
|
|
Feb
|
217.6
|
1.7%
|
28.6%
|
Mar
|
275,0
|
0,9%
|
24,6%
|
|
Mar
|
220.7
|
1.4%
|
27.4%
|
Apr
|
277,2
|
0,8%
|
23,8%
|
|
Apr
|
223.9
|
1.4%
|
22.9%
|
May
|
281,5
|
1,6%
|
22,6%
|
|
May
|
229.6
|
2.5%
|
22.8%
|
Jun
|
285,5
|
1,4%
|
21,3%
|
|
Jun
|
235.3
|
2.5%
|
23.6%
|
Jul
|
288,4
|
1,0%
|
19,4%
|
|
Jul
|
241.6
|
2.7%
|
25.1%
|
Aug
|
291,5
|
1,1%
|
18,1%
|
|
Aug
|
246.9
|
2.2%
|
25.8%
|
Sep
|
296,1
|
1,6%
|
18,0%
|
|
Sep
|
250.9
|
1.6%
|
26.5%
|
Oct
|
301,2
|
1,7%
|
17,9%
|
|
Oct
|
255.5
|
1.8%
|
26.9%
|
Nov
|
308,1
|
2,3%
|
18,0%
|
|
Nov
|
261,0
|
2.2%
|
27.6%
|
Dec
|
318,9
|
3,5%
|
20,1%
|
|
Dec
|
265.6
|
1.8%
|
27.6%
|
|
|
|
|
|
|
|
|
|
2012 Annualized Variation
|
20.10%
|
|
Three Years Accum. Variation
(2012)
|
94.81%
|
|
2011 Annualized Variation
|
27.60%
|
|
Three Years Accum. Variation
(2011)
|
102.60%
|
|
|
|
|
|
|
|
|
|
|
|
The
above chart shows the inflation evolution in Venezuela during the years ended
December 31st, 2012 and 2011. All
figures can be downloaded from Banco Central de Venezuela´s web page (www.bcv.org.ve), “Información Estadística” section, “Indice
Nacional de Precios al Consumidor (INPC)” tab. Three years figures come
from my own computations.
Inflation accounting is governed in Full IFRS under IAS 29 "Financial Reporting in Hyperinflationary Economies"
and in IFRS for SMEs under Section 31 "Hyperinflation".
In Venezuela, this matter is also subject to the so called Bulletins of
Application “BA VEN-NIF”, national standards that must be applied for all
entities reporting under Venezuelan Accepted Accounting Principles (VEN-NIF).
Venezuelan experienced accountants have worked with the inflationary matter
for many years. Many experienced professionals are adequately trained in accounting
and tax issues of Adjustment for Inflation Accounting, Deferred Income Tax from
Inflation Adjustment, Income Tax Adjustment for Inflation, etc. Less-skilled accounting
students and professionals could confront challenging situations to deal with
this complex issue. In the rest of the world, as there is virtually no
inflation, accountants don't worry about this issue.
Venezuelan accounting professionals are up-to-date with respect to the various BA VEN-NIF issued by the Federación de Colegios de Contadores Públicos de Venezuela
(www.fccpv.org), the national accountants federation.
Therefore, I will not address the circumstances under which Venezuelan entities
have to adjust their financial statements for the effects of inflation, as
established it these standards. But one thing is to apply the BA
VEN-NIF to entities reporting in Venezuela under those rules and another is to
apply Full IFRS´s or IFRS for SME´s to an entity reporting under any of these
international standards.
Circumstances affecting the above mentioned entities (these who do not
report under VEN-NIF) but have to report under Pure IFRS (Full IFRS´s or IFRS
for SME´s), is discussed below and I trust it will matter both to Venezuelan accountants
reporting under any of the Pure IFRS and/or foreign accountants who must review
or audit the financial statements of Venezuelan subsidiaries that should be consolidated
in their parent companies´ financial statements.
The situation arises from the interpretation of Pure IFRS in terms of
the application of IAS 29 or Section 31. In both texts is set that the inflation standard
shall apply to an entity whose functional currency is that of a hyperinflationary
economy. These standards also defines when should be considered that an economy
is hyperinflationary. Traditionally and for quite some time, it has been
concluded that if an economy reaches 100% of accumulated inflation in a
continuous period of three (3) years, it should be considered a hyperinflationary
economy. Also, according to Pure IFRS, other factors should be evaluated,
regardless of that figure, to decide if an economy is under the hyperinflationary
condition. However, accountants and financial analysts generally have concluded
that when the inflation of an economy reaches above 100% in three years, it is
because the other factors are already
existent (i.e. all these other factors are concurrent with the increased level
of inflation) and therefore do not require to be verified. Then, traditionally
it has been concluded that if the economy reaches 100% of inflation accumulated in
three (3) years, it should be considered a hyperinflationary economy.
Reviewing the chart above, you will conclude that Venezuela had to be
considered a hyperinflationary economy in 2011, since the level of the
accumulated inflation for the last three years was 102.60%. It should be noted
that the 100% indicator was reached in Venezuela as of November 30, 2009 and
have remained above that level until 2011. Question arises with respect
to year 2012: ¿It is correct that Venezuela should be qualified as a
hyperinflationary economy in 2012, if the accumulated index in the past three
years ended 31 December was 94.81%?
My answer to that question is unquestionably: Yes. Venezuela should be qualified as a
hyperinflationary economy in 2012, regardless the cumulative index for the last
three years is below 100%. It should be observed that the trend of inflation rate
in the country remains unabated, although 2012 figures presented lower results (in
a year) compared to 2011. It is noted, that despite the average of the first 11
months of 2012 was 1.36%, in December it was informed a big jump to 3.50% in just
one month, disproportionate with respect to the previous months and which resulted
in the highest monthly rate of the past 33 months.
Taking into account the provisions of Pure IFRS (IAS 29 of Full IFRS or
Section 31 of IFRS for SME´s) and as indicated in the previous paragraph, it
should conclude that any entity reporting in Venezuela under these rules, must
adjust its financial statements for the effects of inflation in 2012 and record
and disclose all the effects of such recognition as it is established in the international
rules.
