Last checked at 25 Mar 2024 15:45
Press Release
ASA International Group plc announces the impact of IAS 29 accounting treatment of hyperinflation in Ghana and Sierra Leone
Amsterdam, 25 March 2024 - ASA International Group plc, ('ASA International', the 'Company' or the 'Group'), one of the world's largest international microfinance institutions, today announces the impact of accounting for hyperinflation on its operations in Ghana and Sierra Leone for the fiscal year ended 31 December 2023 ('the Period').
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated by the Market Abuse Regulation (EU) No.596/2014, as it forms part of UK law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"). Upon the publication of this announcement, this inside information is now considered to be in the public domain.
Accounting for hyperinflation in Ghana and Sierra Leone
In 2023, the three-year cumulative inflation in Ghana and Sierra Leone exceeded 100%. As a result, hyperinflation accounting will be applied for the first time in the consolidated financial statements of the Group. The IFRS standard IAS 29 "Financial Reporting in Hyperinflationary Economies" ('IAS 29') requires the Group to adjust the 2023 financial information of the operating entities in these countries so that all items are presented to reflect the current purchasing power at the reporting date. Since the trading update issued on 28 February 2024, and in working towards finalising the Group's full year audited results for the year ended 31 December 2023, the Group has been assessing the impact of IAS 29 on the consolidated accounts for the Group.
On the application of IAS 29 to ASA Ghana, a cumulative inflation factor will be applied using the consumer price index ('CPI') in Ghana, published by the Ghana Statistical Services. The movement in the CPI for the Period was 25% (2022: 52%). On the application of IAS 29 to ASA Sierra Leone, a cumulative inflation factor will be applied using the CPI in Sierra Leone, published by Statistics Sierra Leone. The movement in the CPI for the Period was 53% (2022: 36%).
The application of IAS 29 includes the following adjustments:
- Adjustment of historical cost non-monetary assets, liabilities and stated capital for the change in purchasing power caused by inflation from the date of initial recognition to the balance sheet date;
- Adjustment of the income statement for inflation during the Period;
- The income statement is translated at the period-end foreign exchange rate instead of an average rate; and
- A net monetary gain or loss adjustment, recognised in the income statement, to reflect the impact of inflation and exchange rate movement on holding monetary assets and liabilities in local currency.
Impact on 2023 performance, equity, cash position and 2024 outlook
The application of IAS 29 results in non-cash adjustments in the presentation of the financial information of the Company. Total comprehensive income remains similar and total equity increases due to the IAS 29 adjustments. Having regard to the impact of IAS 29 and further audit adjustments, the Company now expects to report pre-tax income in excess of USD 28.4m (the consensus estimate for pre-tax income at the time of the update on 28 February 2024) and net income for 2023 of between USD 7.0 million and USD 9.0 million.
The unrestricted cash and cash equivalents of the Company of USD 48 million as at 31 December 2023 remains strong.
The outlook on 2024 remains positive with improved business performance of our operations compared to 2023 on the back of much stronger performance in H2 2023. However, the reported net income for the Group will depend on which countries will be classified as hyperinflationary at the end 2024. Based on current preliminary inflation projections it is expected that the accounting for hyperinflation will be applicable for Pakistan in 2024. Ghana, Sierra Leone and Nigeria are on the watchlist.
Publication of statutory financial statements 2023 of ASA Pakistan, ASA Ghana and ASA India
Some of the operating entities in the Group need to publish their statutory financial statements on their website and in a local nationwide newspaper in line with regulatory requirements. ASA Pakistan will publish these for the first time on 29 March 2024 because of obtaining the microfinance bank license in 2023. ASA Ghana will report before the end of April 2024. ASA India publishes its statutory financial statements for the year ended 31 March 2024 before the end of November 2024.
We note that these statutory financial statements are prepared in line with local regulations and are therefore materially different from the financial information of these entities used for preparing the Group's consolidated financial statements. The Group's consolidated financial statements are entirely based on IFRS, whereas local regulations require different treatment of certain elements. Examples are different calculation of the expected credit loss provision, use of exchange rates published by the local central bank and the building up of statutory reserves. The statutory financial statements of ASA Ghana are prepared under IFRS but will not include the adjustments for IAS 29 that will be required in the consolidated accounts for the Group as local authorities do not recognize the economy as hyperinflationary.
Notice of Full Year Results and AGM
The Company will announce its full year audited results for the year ended 31 December 2023 on 23 April 2024. The Company's Annual General Meeting will be held on 20 June 2024.
Please note that the financial information provided in this announcement is still subject to audit and, therefore, subject to change.
The person responsible for the release of this announcement on behalf of the Company for the purposes of MAR is Tanwir Rahman, CFO.
Enquiries:
ASA International Group plc
Investor Relations
Mischa Assink ir@asa-international.com
About ASA International Group plc
ASA International Group plc (ASAI: LN) is one of the world's largest international microfinance institutions, with a strong commitment to financial inclusion and socioeconomic progress. The company provides small, socially responsible loans to low-income, financially underserved entrepreneurs, predominantly women, across South Asia, South East Asia, West and East Africa.