Computerized General Equilibrium (CGE) Technique To Revalue The Financial Statement Due To Currency Depreciation
Abstract/Description
Each country has a single currency linked to all economic factors, and the currency's value must be carefully considered while evaluating any financial statement. The time component is included on the accounts receivable and payable sides and many other components of financial statements, and the currency value changes over time. Purchasing power is another significant element not covered in the financial statement. To effectively portray an organization's financial value, this research looks at all the components needed for a currency's valuation at a certain point in time. This research discusses how to integrate these components into the financial statement.
The objective is to identify the crucial economic elements that influence the currency's value and the company's financial health (Oday Tamimi 2020). If such components can be standardized, the currency revaluation process will always be easier (Zorica Mladenovic, 2010). The research tries to include economic factors when determining the percentage of currency depreciation.
The model is statistically tested under a 15% currency devaluation shock using the Computerized General Equilibrium (CGE) technique. The CGE test shocks one variable (the exchange rate) while maintaining other variables constant. Using Pakistan's Social Accounting Matrix (SAM), the analysis showed that the currency's value had significantly declined. According to the data, Pakistan's currency devaluation was 1.78%, which must be included in the financial statement. This devaluation percentage was applied to the debtor's side, creating anew financial statement. An allowance was generated, and a cost was assigned as a devaluation charge on the expense side. Many financial statements may lose value in this way. Similar research may be done on the payable side. Testing the devaluation model with greater shocks and alternative methodologies is also possible.
Track
Finance
Session Number/Theme
2A: Finance
Session Chair
Dr. Azima Khan ; Dr. Ameenullah Aman
Start Date/Time
30-5-2024 3:25 PM
End Date/Time
30-5-2024 4:55 PM
Location
MCS – 3 AMAN CED Building
Recommended Citation
Mustafa, N., Khan, H. R., & Hayat, M. (2024). Computerized General Equilibrium (CGE) Technique To Revalue The Financial Statement Due To Currency Depreciation. 3rd IBA SBS International Conference 2024. Retrieved from https://ir.iba.edu.pk/sbsic/2024/program/19
COinS
Computerized General Equilibrium (CGE) Technique To Revalue The Financial Statement Due To Currency Depreciation
MCS – 3 AMAN CED Building
Each country has a single currency linked to all economic factors, and the currency's value must be carefully considered while evaluating any financial statement. The time component is included on the accounts receivable and payable sides and many other components of financial statements, and the currency value changes over time. Purchasing power is another significant element not covered in the financial statement. To effectively portray an organization's financial value, this research looks at all the components needed for a currency's valuation at a certain point in time. This research discusses how to integrate these components into the financial statement.
The objective is to identify the crucial economic elements that influence the currency's value and the company's financial health (Oday Tamimi 2020). If such components can be standardized, the currency revaluation process will always be easier (Zorica Mladenovic, 2010). The research tries to include economic factors when determining the percentage of currency depreciation.
The model is statistically tested under a 15% currency devaluation shock using the Computerized General Equilibrium (CGE) technique. The CGE test shocks one variable (the exchange rate) while maintaining other variables constant. Using Pakistan's Social Accounting Matrix (SAM), the analysis showed that the currency's value had significantly declined. According to the data, Pakistan's currency devaluation was 1.78%, which must be included in the financial statement. This devaluation percentage was applied to the debtor's side, creating anew financial statement. An allowance was generated, and a cost was assigned as a devaluation charge on the expense side. Many financial statements may lose value in this way. Similar research may be done on the payable side. Testing the devaluation model with greater shocks and alternative methodologies is also possible.
