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Revaluation of Financial Statement Due To
Academy of Accounting and Financial Studies Journal Volume 25, Special Issue 2, 2021 REVALUATION OF FINANCIAL STATEMENT DUE TO DEVALUATION OF CURRENCY– DOES FINANCIAL STATEMENT SHOW ACCURATE VALUE OF YOUR ORGANIZATION? Muhammad Nabeel Mustafa*, SZABIST University Haroon ur Rashid Khan, SZABIST University Salman Ahmed Shaikh, SZABIST University ABSTRACT Purpose: Debtors are current asset has a time of 120 days at max. During this time, the value of debtors gets changed. This study explores the effect of this time value of money. The objective of this research is to sight see the effect of the time value of money, normal inflation, and purchasing power on the comprehensive debtors/receivable side of the balance sheet, which can be devalued if key macroeconomic factors determine the devaluation percentage of a single currency. Methodology: Concerning these significant questions of the research, we grasped a pragmatic philosophy with an inductive approach. A mono-method of qualitative based on grounded theory was endorsed, which helped to unfold a new model through qualitative data analysis. Results: A new strategy is developed, which utters three components; normal inflation, time value of money, and purchasing power revealing significant contribution in literature. The effect of these constructs was not incorporated in the financial statement, showing vague financial valuation. These constructs have a significant impact on the financial statement of any organization especially with items having time components in the balance sheet, such as receivables and payables. Research Limitations: This research is limited to only one currency i.e., Pakistani Rupee but can be implemented on any currency. Practical Implication: The strategy will help auditors to pass the adjustment entry in the balance sheet to adjust the value of the currency at the year-end. -
Redenomination of Naira: a Strategy for Inflationary Reduction
International Journal of Academic Research in Business and Social Sciences Vol. 1 1 , No. 2, 2021, E-ISSN: 2222-6990 © 2021 HRMARS Redenomination of Naira: A Strategy for Inflationary Reduction Osakwe Charity Ifunanya, Nduka, Afamefuna Joseph, Obi-nwosu Victoria Ogochukwu To Link this Article: http://dx.doi.org/10.6007/IJARBSS/v11-i2/8860 DOI:10.6007/IJARBSS/v11-i2/8860 Received: 02 January 2021, Revised: 29 January 2021, Accepted: 15 February 2021 Published Online: 25 February 2021 In-Text Citation: (Ifunanya et al., 2021) To Cite this Article: Ifunanya, O. C., Nduka, A. J., & Ogochukwu, O. V. (2021). Redenomination of Naira: A Strategy for Inflationary Reduction. International Journal of Academic Research in Business and Social Sciences, 11(2), 472–481. Copyright: © 2021 The Author(s) Published by Human Resource Management Academic Research Society (www.hrmars.com) This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode Vol. 11, No. 2, 2021, Pg. 472 - 481 http://hrmars.com/index.php/pages/detail/IJARBSS JOURNAL HOMEPAGE Full Terms & Conditions of access and use can be found at http://hrmars.com/index.php/pages/detail/publication-ethics 472 International Journal of Academic Research in Business and Social Sciences Vol. 1 1 , No. 2, 2021, E-ISSN: 2222-6990 © 2021 HRMARS Redenomination of Naira: A Strategy for Inflationary Reduction Osakwe Charity Ifunanya (PhD) Department of Banking and Finance, Nnamdi Azikiwe University, Anambra State, PMB 5025, Awka, Nigeria. -
The Choice and Design of Exchange Rate Regimes Már Gudmundsson
The choice and design of exchange rate regimes Már Gudmundsson Introduction This paper discusses the design and management of exchange rate regimes in Africa.1 It starts by looking at the current landscape of exchange rate regimes in the region and comparing it to other regions of the world. It then discusses relevant considerations for the choice of exchange rate regimes in developing countries, including the optimal currency area, but also their limitations in a developing country context. The ability of countries to deliver disciplined macroeconomic policies inside or outside a currency union is an important consideration in that regard, along with political goals and the promotion of financial sector development and integration. The paper then proceeds to discuss in turn the management of flexible exchange rates, the design of exchange rate pegs and monetary integration. Exchange rate regimes in Africa Exchange rate regimes in Africa reflect choices made at the time of independence as well as more recent trends in exchange rate regimes of developing countries. Original exchange rate pegs in many cases evolved over time into flexible exchange rates. That development was given a further boost by the stabilisation and liberalisation programmes in the 1980s and 1990s. Former colonies of France constitute a core group in the CFA franc zone of western and central Africa, which is composed of two currency unions with a hard external peg to the euro, underpinned by the French authorities. Three neighbouring countries of South Africa are part of the rand zone, where national currencies are 1 The paper draws extensively on Masson and Pattillo (2005). -
Chapter 1717
ChapterChapter 1717 FixedFixed ExchangeExchange RatesRates andand ForeignForeign ExchangeExchange InterventionIntervention Copyright © 2003 Pearson Education, Inc. Slide 17-1 Chapter 17 Learning Goals • How a central bank must manage monetary policy so as to fix its currency's value in the foreign exchange market. • The relationship between the central bank's foreign exchange reserves, its purchases and sales in the foreign exchange market, and the money supply. • How monetary, fiscal, and sterilized intervention policies affect the economy under a fixed exchange rate. • Some causes and effects of balance of payments crises. • How alternative multilateral systems for pegging exchange rates work. Copyright © 2003 Pearson Education, Inc. Slide 17-2 Chapter Organization ! Why Study Fixed Exchange Rates? ! Central Bank Intervention and the Money Supply ! How the Central Bank Fixes the Exchange Rates ! Stabilization Policies with a Fixed Exchange Rate ! Balance of Payments Crises and Capital Flight ! Managed Floating and Sterilized Intervention ! Reserve Currencies in the World Monetary System ! The Gold Standard ! Liquidity Traps Copyright © 2003 Pearson Education, Inc. Slide 17-3 Chapter Organization ! Summary ! Appendix I: Equilibrium in the Foreign Exchange Market with Imperfect Asset Substitutability ! Appendix III: The Timing of Balance of Payments Crises Copyright © 2003 Pearson Education, Inc. Slide 17-4 Introduction ! In reality, the assumption of complete exchange rate flexibility is rarely accurate. • Industrialized countries operate under a hybrid system of managed floating exchange rates. – A system in which governments attempt to moderate exchange rate movements without keeping exchange rates rigidly fixed. • A number of developing countries have retained some form of government exchange rate fixing. ! How do central banks intervene in the foreign exchange market? Copyright © 2003 Pearson Education, Inc. -
Redenomination of Naira: a Critical Analysis of Its Problems and Prospects
EUROPEAN ACADEMIC RESEARCH Vol. VII, Issue 12/ March 2020 Impact Factor: 3.4546 (UIF) ISSN 2286-4822 DRJI Value: 5.9 (B+) www.euacademic.org Redenomination of Naira: A Critical Analysis of Its Problems and Prospects OSAKWE CHARITY IFUNANYA (Ph.D)1 Department of Banking and Finance Faculty of Management Sciences Nnamdi Azikiwe University, Awka, Nigeria Abstract The study examines the problems and prospects of redenominating the naira currency. The economic consequences of the devaluation of Naira currency in the eighties are still being felt in the low value of naira. To ascertain Nigerians view on redenominating the naira, a total number of 153 respondents were studied and the data extracted from them was analyzed with simple percentage method. The study found that redenomination of naira will lead to the economic recovery of Nigeria and that redenomination can increase the prices of Nigeria export. The study recommends that for the redenomination exercise to be successful, it should be complemented with strict and disciplined fiscal policy so as to strengthen the economy and sustain the value of the redenominated currency and that the redenomination exercise should be timed in such a way that it will not create uncertainty and instability that will make investors to be risk averse. Key words: Redenomination, Prospects, Currency, Decimalization, and evaluation. 1 The author Osakwe Charity Ifunanya is a Financial Management Lecturer in Banking and Finance Department of Nnamdi Azikiwe University, Awka, Nigeria. Her research interests cover diverse areas of Investment Banking and finance. Her recent publications include: stock market capitalization and economic growth of Nigeria and South Africa (2000-2018), Credit Risk Management and Efficiency in the Banking Industry of an Emerging Economy in Africa: Evidence from Nigeria and stock market development and economic growth in Nigeria: A camaraderie Reconnaissance amongst others. -
The Scope for Foreign Exchange Market Interventions
THE SCOPE FOR FOREIGN EXCHANGE MARKET INTERVENTIONS No. 204 October 2011 THE SCOPE FOR FOREIGN EXCHANGE MARKET INTERVENTIONS Peter Bofinger No. 204 October 2011 Acknowledgement: This paper was prepared as a background note for a seminar of the UNCTAD Division on Globalization and Development Strategies. The author is grateful to seminar participants for valuable comments during the discussion. UNCTAD/OSG/DP/2011/4 ii The opinions expressed in this paper are those of the author and are not to be taken as the official views of the UNCTAD Secretariat or its Member States. The designations and terminology employed are also those of the author. UNCTAD Discussion Papers are read anonymously by at least one referee, whose comments are taken into account before publication. Comments on this paper are invited and may be addressed to the author, c/o the Publications Assistant, Macroeconomic and Development Policies Branch (MDPB), Division on Globalization and Development Strategies (DGDS), United Nations Conference on Trade and Development (UNCTAD), Palais des Nations, CH-1211 Geneva 10, Switzerland (Telefax no: +41 (0)22 917 0274/Telephone no: +41 (0)22 917 5896). Copies of Discussion Papers may also be obtained from this address. New Discussion Papers are available on the UNCTAD website at http://www.unctad.org. JEL classification: F31, F32, F33 iii Contents Page Abstract ....................................................................................................................................................... 1 I. THE CURRENT DEBATE ON THE REFORM OF THE INTERNATIONAL MONETARY SYSTEM (IMS) ......................................................................................................... 1 II. THE SYSTEM OF FLEXIBLE EXCHANGE RATES: MYTHS AND REALITY ................... 2 A. Myths of flexible exchange rates .................................................................................................. 2 B. The puzzling and dangerous reality of flexible exchange rates ................................................... -
Revaluation Versus Devaluation: a Study of Exchange-Rate Changes William R
© The Chicago Mercantile Exchange, 1979 www.cmegroup.com Revaluation Versus Devaluation: A Study of Exchange-Rate Changes William R. Folks, Jr. and Stanley R. Stansell The purpose of this study is to determine whether the technique of linear discriminant analysis can assist in exchange-risk management. Specifically, a discriminant function, using readily available or estimable macro- economic values is developed which will classify countries into two dis tinct groups: 1) countries whose currency value (relative to the value of the dollar) will decrease by 5 percent or more over a two-year period, and 2) countries whose currency value will not show such a decrease. The authors believe that such a discriminant function, if reasonably ac curate, is valuable in corporate exchange-risk management. Under normal operating conditions, U.S.-based corporations with direct investments overseas generally have an excess of assets over liabilities that are ex posed to the risk of currency changes. Thus, a reduction in foreign-cur rency values causes, at least for accounting purposes, a loss in the value of exposed assets. Numerous strategies for adjusting the exchange-risk posture of the firm exist but require some warning for effective use. Some projection of the extent of currency-rate change is also required to pre vent adoption of exchange-adjustment strategies which may prove more costly than the losses they were designed to prevent. The authors hope that the discriminant function developed below will provide an early warning of impending downward exchange-rate changes. Armed with this warning, corroborated possibly by local sources, non- statistically based projections, and other information, the exchange- risk manager can then provide closer surveillance of the currency under suspicion, take long-range steps to adjust the exchange-risk posture of the firm, and develop contingency plans for short-term measures should the decrease in currency value become imminent. -
Effects of Open Market Operations and Foreign Exchange Market Operations Under Flexible Exchange Rates
This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: The International Transmission of Inflation Volume Author/Editor: Michael R. Darby, James R. Lothian and Arthur E. Gandolfi, Anna J. Schwartz, Alan C. Stockman Volume Publisher: University of Chicago Press Volume ISBN: 0-226-13641-8 Volume URL: http://www.nber.org/books/darb83-1 Publication Date: 1983 Chapter Title: Effects of Open Market Operations and Foreign Exchange Market Operations under Flexible Exchange Rates Chapter Author: Dan Lee Chapter URL: http://www.nber.org/chapters/c6134 Chapter pages in book: (p. 349 - 379) 12 Effects of Open Market Operations and Foreign Exchange Market Operations under Flexible Exchange Rates Dan Lee During the period of pegged exchange rates under the Bretton Woods Agreement, attention was directed to the problems of capital and reserve flows in the literature of international monetary economics. One relevant question was whether an individual country can conduct an independent monetary policy under fixed exchange rates. After the collapse of this system in the early seventies, attention was diverted to the determination of exchange rates and the workings of the flexible exchange-rate system. At least in theory, it seems that we finally have independent monetary policies. This chapter examines one of the topics in this still developing field, namely the relative effects of the two alternative instruments, open market operations (OMO) and foreign exchange market operations (FXO), in a small open economy. This topic is of great importance to policymakers who are faced with various policy targets and have two alternative instruments. -
The Reform of the Renminbi Exchange Rate Regime
II THE MACRO- FINANCIAL ENVIRONMENT Box 4 THE REFORM OF THE RENMINBI EXCHANGE RATE REGIME Against a background of large and growing global financial imbalances and concerns about the associated risks for global financial stability, international pressure mounted on the Chinese authorities to adopt a more flexible exchange rate regime in order to help curb growing global current account imbalances and to alleviate upward pressure on more flexible international currencies. Many analysts also expected that any revaluation of the Chinese currency would trigger greater exchange rate flexibility in other Asian countries. On 21 July 2005, the renminbi was revalued by 2% against the US dollar, from 8.2765 to 8.11, and the Chinese authorities announced that they had moved to a “managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies”. However, since the reforms, the renminbi has continued to be tightly managed against the US dollar, so that little impact on the scale of global imbalances can be expected in the short term. The Peoples Bank of China (PBC) has emphasised that managing the exchange rate “with reference to” a basket of currencies does not mean that the renminbi will be pegged to a basket of currencies. The objective of the new regime is to keep the renminbi exchange rate basically stable at an adaptive equilibrium level. While the weights of the currencies in the reference basket were not disclosed, the currencies were selected mainly on the basis of the relative shares of China’s trading partners in goods and services. -
The Renminbi Exchange Rate Revaluation: Theory, Practice and Lessons from Japan
The Renminbi Exchange Rate Revaluation: Theory, Practice and Lessons from Japan Toshiki Kanamori (金森俊树) Zhijun Zhao (赵志君) March, 2006 Asian Development Bank Institute Kasumigaseki Building, 8th Floor 3-2-5 Kasumigaseki Chiyoda-ku, Tokyo 100-6008 Japan www.adbi.org ADBI Policy Paper No. 9 [email protected] © 2006 Asian Development Bank Institute. Knowledge Management Unit 3/06 ISBN: 4-89974-010-7 The views expressed herein do not necessarily reflect the views or position of the ADB Institute, its Advisory Council, Board of Directors, or the governments they represent. The ADB Institute does not guarantee the accuracy of the data included and accepts no responsibility for any consequences arising from its use. The word “country” or other geographical names do not imply any judgment by the ADB Institute as to the legal or other status of any entity, including its borders. About the authors Toshiki Kanamori is Director, Administration, Management and Coordination of the Asian Development Bank Institute (ADBI). He graduated from Hitotsubashi University as well as from New Asia and Yale Center of Chinese University of Hong Kong. During his government career he served with Japan’s Ministry of Finance, Ministry of Foreign Affairs, and Ministry of International Trade and Industry. He was an Alternate Director at ADB HQ from 1990 to 1993. Before joining the ADBI, he was a Visiting Fellow at the China Business Centre (CBC), Hong Kong Polytechnic University. He has published many articles on the PRC economy as well as on global socio-economic issues. Zhijun Zhao is professor and senior researcher of the Institute of Economics, Chinese Academy of Social Sciences (CASS). -
US Intervention During the Bretton Wood Era: 1962–1973
working 11 08 paper U.S. Intervention during the Bretton Wood Era: 1962–1973 Michael D. Bordo, Owen F. Humpage, and Anna J. Schwartz FEDERAL RESERVE BANK OF CLEVELAND Working papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded offi cial Federal Reserve Bank of Cleveland publications. The views stated herein are those of the authors and are not necessarily those of the Federal Reserve Bank of Cleveland or of the Board of Governors of the Federal Reserve System. Working papers are available at: www.clevelandfed.org/research. Working Paper 11-08 April 2011 U.S. Intervention during the Bretton Wood Era: 1962–1973 by Michael D. Bordo, Owen F. Humpage, and Anna J. Schwartz By the early 1960s, outstanding U.S. dollar liabilities began to exceed the U.S. gold stock, suggesting that the United States could not completely maintain its pledge to convert dollars into gold at the offi cial price. This raised uncertainty about the Bretton Woods parity grid, and speculation seemed to grow. In re- sponse, the Federal Reserve instituted a series of swap lines to provide central banks with cover for unwanted, but temporary accumulations of dollars and to provide foreign central banks with dollar funds to fi nance their own interven- tions. The Treasury also began intervening in the market. The operations often forestalled gold losses, but in so doing, delayed the need to solve Bretton Woods’ fundamental underlying problems. -
Since 1960, Governments of Developing and Transition Economies Have Redenominated Their Currencies on Approximately Seventy Occasions (Mosley, 2005)
Munich Personal RePEc Archive The Economics of Currency Redenomination: An Appraisal of CBN Redenomination Proposal Ahmad Bello, Dogarawa Ahmadu Bello University, Zaria-Nigeria 2007 Online at https://mpra.ub.uni-muenchen.de/23195/ MPRA Paper No. 23195, posted 10 Jun 2010 13:40 UTC ABSTRACT On 14th August 2007, the Central Bank of Nigeria (CBN) through its governor made public its proposal to restructure and redenominate the naira by dropping two zeros or moving two decimal points to the left from the currency and issuing more coin denominations with a view to ensuring macroeconomic stability and efficient payment system. The announcement, which took many by surprise, generated a lot of debate among Nigerians and non-Nigerians within and outside the country. While some are of the view that the CBN deserves commendation for the bold step, others are condemning the entire proposal, yet another group try to synthesise the various views from political economy perspectives. Although, the scheme has since been suspended, stakeholders and observers continue to express their views and opinions about the desirability and timeliness of the policy. Accordingly, this paper appraises the suspended naira redenomination scheme in the light of its objectives. The paper is descriptive with presentation based on literature survey and desk analysis. The paper confirms that currency redenomination is based on some happenings within a country and its outcome depends on various fiscal and monetary policies aimed at stabilising the economy. It further posits that redenomination of the naira is not completely a bad policy despite the problems associated with it. It however, suggests that the new strategy should be thoroughly studied and understood, and should go beyond its psychological and portability effects; it should be associated with broader macroeconomic and fiscal objectives.