Venezuela has established a system that provides inflation adjustments for non-monetary assets and liabilities. Regular annual adjustments to non-monetary assets and liabilities, as well as to shareholders' equity, are taken into account in computing taxable income. Monetary assets are not adjusted for inflation. Adjustments are based on the change in the consumer price index. Detailed rules apply to every type of asset or liability.
The tax-inflation system is used only for adjusting the historical taxable income of a corporation. Such a tax-inflation adjustment is not to be recorded in the financial accounting records.
For 1995 and beyond, under the Venezuelan accounting principle DPC-10 (Declaracion de Principios de Contabilidad Numero 10), companies have to present their financial statements adjusted by inflation; that is, historical financial statements would be discontinued for reporting purposes. The accounting rules and procedures have similarities with those in the tax system but they are not the same.
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