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The effects of Inflation on financial statements report and Income tax calculation.

The inflation rate flactuates according to the demand and supply force in the market and general economical  and political trends but its effects are not reflected on the annual financial reporting and income tax deduction of both public and private companies at the end of financial year. What can be the impacts of inflation rates in term of cost and benefit to the Assets, capital and liabilities of companies both in private and public sectors, and, the accuracy, completeness and reliability of the state of affair information at the end of financial year???

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Question added by Mohamed Billow , Financial & Tax Consultant , Mabrook Computers Limited, Hu One Constructions Limited, Aqsa Investment Limited and Hanat Ltd
Date Posted: 2015/04/20
Shahbaz Hayder
by Shahbaz Hayder , Group Head of Finance , Sharif Group of Companies

Inflation will increase the cost of production while increase in prices is subject to competitors' prices, demand of the customers and approval of price controlling authorities.

In most of the case a company bears a loss due to high inflation and since tax is related to income obviously company will pay less tax and government will earn less tax revenue.

DHASARATHAN KAMIAH NAGIAH
by DHASARATHAN KAMIAH NAGIAH , Manager Plant Maintenance , Premier Explosives Limited

Inflation will increase the cost of production while increase in prices is subject to competitors' prices, demand of the customers and approval of price controlling authorities.

I fully agree with this view, finally company will pay less Tax & Govt. will get less Revenue.

Vahab Sahvi
by Vahab Sahvi , chief accountant , Islamic Republic Of Iran Shipping Line

Inflation has affected the change in the cost of goods and services over the financial year, and if this increase has not been attributable to the cost of sales by buyers, the firm will have to compete in the market in order to reduce the inflationary profits. That is, the net profit loss on the balance sheet that results in a reduction in the amount of income tax paid.

Imane Guennou
by Imane Guennou , sales coordinator , palmeraie country club

even small amount of inflation accumulating over time can grow to distrota company's reported financial position and results of operations, the growing economies in emerging markets, the international market for oil, and other economic factors threaten to increase inflation rates in the future.