Inflation Accounting

The load inflation adjustment puts on the period close

The difficulty lies less in the arithmetic than in the scope of the work and the fact that it is repeated every period. Every account has to be classified as monetary or non-monetary, and every non-monetary item has to be tied to the right date and the right coefficient. Monetary items such as cash, receivables and payables are already expressed in current terms and are not restated. In most companies fixed assets are the heaviest part of the work, because each asset’s acquisition date and accumulated depreciation are taken into account individually. A classification error made in one period carries forward into the periods that follow.

VUK and TMS/IFRS each define inflation adjustment by their own rules, so companies that report under both have to produce separate results for the same period. When the calculation is done outside SAP, the amounts are brought into the system as lump-sum postings. When the auditor asks which coefficient and which classification an amount came from, the answer lies in spreadsheets outside the system rather than in the accounting records. The closing calendar also ends up depending on how quickly those spreadsheets can be prepared.

Nor is inflation adjustment a one-off exercise. The amounts restated in one period become the starting point for the next, so the calculation has to be made with the same classification and the same method every period. That continuity is hard to preserve as spreadsheets pass from hand to hand.

How the suite runs the adjustment inside SAP

The suite brings the core elements of the adjustment into SAP. Restatement coefficients are held in coefficient tables in the system. Items are classified as monetary or non-monetary. The automated restatement batch then generates the adjustment postings from those coefficients and that classification. The calculation and the accounting entry are created in the same place, and amounts no longer have to be carried into the system separately.

The suite is integrated with FI and Asset Accounting (AA), and fixed assets are brought into the restatement run through that integration. The VUK and TMS/IFRS bases are produced in parallel, and both are obtained in a single run. The results of the run are followed in the suite’s restatement reports.

What changes for the team at close and in audit

The manual restatement work at period end becomes an automated run. The team spends its time checking that the coefficients are current and the classification is correct, rather than preparing spreadsheets. Because both bases come out of the same run and the same source data, they do not have to be prepared separately, and the adjustment is completed without delaying the close.

Because the adjustment postings are generated in the system, they are traceable end to end. When the auditor asks how an amount was derived, the answer comes from the posting itself and from the restatement reports. The work no longer depends on what a few individuals know: the same run is repeated every period under the same rules.

What is defined during implementation, and who the suite suits

Fitting the suite to a company rests on classification and scope decisions. Which accounts count as monetary and which as non-monetary is defined during implementation, according to the company’s chart of accounts and accounting policy. Which bases are in scope is settled at the same stage, according to the company’s reporting obligations. The coefficients are based on officially published price indices, and the suite holds them in its own tables.

The suite suits companies that are required to apply inflation adjustment and currently do the work by hand outside SAP. It is aimed at CFOs, finance directors, and finance and audit teams. The manual burden is heaviest in companies with a large number of fixed assets, or with a need for both the VUK and the TMS/IFRS basis; the suite’s Asset Accounting integration and parallel production of the bases answer these needs directly.