IHH Healthcare Berhad (IHH) Earnings Call Transcript & Summary

So everyone, I think -- I believe, you should know me. I'm Penelope from the IHH Investor Relations team. Now of course, I have Joshua here with me as well conducting this training session. So basically, what I mentioned earlier, we're organizing this webinar so that -- and we're actually working with PwC, which is -- the purpose of this is actually to demystify the complexity of MFRS 129 which is essentially the financial reporting in hyperinflationary economies. And with me today, I have Mr. [indiscernible], who is the partner assurance PwC and Mr. [indiscernible] Singh, who is the Senior Manager for CMEES also from PwC. And of course, I have the pleasure to invite Ms. Fiona Tay, who is our Group Head of Finance for IHH Healthcare as well. First of all, I actually go into the session itself. That's where I want to do a very quick poll, and I hope everyone can just quickly join in. And of course, as -- how familiar are you with the MFRS 129 company standard. This is just to basically give us or at least the team as well as the PwC speakers a catch-up, again, in a half a minute, you are with the company standards. And hopefully, through this webinar trading session, they can help you improve that. As far as I can see, well, I'm glad to see there are some people who are somewhat familiar. Of course, there are people who are also unfamiliar and probably new to this accounting standard again. Yes. So I think having about 65 of you participating in this, again, well, [indiscernible] people who are somewhat familiar, some people are unfamiliar, but no worries that the purpose of the training today, which is to let all of you have a better understanding knowledge of what this concept is all about. And of course, that's why I have my 2 subject matter experts here to guide you through this session. So without further ado, I will actually pass the call to Mr. Tiang and Mr. [indiscernible]. But before we jump into the actual presentation, we actually would have -- encourage you to send in your questions along the way as we conduct the training. [Operator Instructions] But just on [indiscernible], I think both our speakers will only be answering MFRS 129 accounting related questions. Of course, Fiona and I will be here to help you somewhat gain some knowledge on the IHS -- I mean if you have questions regarding IHS, we will try our best, but obviously, this is not a platform to do it. So again, if any accounting-related questions, then you can direct them to both our speakers. So -- and also, we'll be recording this webinar. And with that, I will pass on to our 2 speakers, Mr. Tiang and Mr. [indiscernible], to you.

Thank you. So my name is Tiang. I'm a panel from PwC. I head the capital markets and also the Accounting Advising Services for PwC Malaysia. And assisting me today is my senior manager, [indiscernible]. So on the next slide, right, what I'll do is I'll take you through the Session 1, then [indiscernible] will take you to Session 2 and 3, then I'll wrap up Session 4 and 5, and that will bring us to the Q&A session. So if you have any questions, feel free to ask us at that point of time. While it was mentioned before, the questions are -- will be focusing solely on the principles of IAS 129, which I'll be referring to other than saying MFRS 129, we just referred the hyperefficient standard as IAS 29, okay? So let's go into Session 1. This just a bit of a background on what is hyperinflation. Essentially, hyperinflation is brand the general price level of goods and services in the country goes extremely -- changes quite rapidly. And basically, it brings down the purchasing power of the currency. So essentially, right, and how does it affect the financial statements of financial -- financial statements with a functional currency of a hyperinflation economy. Basically, it means that the historical cost accounted is the long-term meaningful, reason being because the purchasing power of the financial currency is no longer applicable due to the interest rate increase basically, the amounts are no longer comparable between the periods. And also for that particular country, its financial statements are also not comparable to other countries as well. And most importantly, the gain and loss in the purchasing power is not recorded. So because of that, the accounting standards has tried to basically make the financial statements more -- so far more reliable and more relevant in the face of such economic conditions. Hence, IAS 29 was brought in to address this issue, okay? So essentially, what are the characteristics of hyperinflation. The standard itself does not prescribe any absolute rate. But however, as a matter of judgment, we see both quantitative and qualitative factors. In fact, the quantitative factors is something that we actually use because it's easier for people to measure as compared to qualitative, which is more prescriptive. So one of the more important quantitative factors is on a 3-year cumulative basis, if the inflation is more than 100%, there is a very clear indicator that the country is in a hyperinflation environment. So other than these quantitative factors, we also look at qualitative status. As for example, the people in that particular country [indiscernible] wealth in nonmonetary assets. And reason why nonmonetary assets is because monetary items lose their purchasing power. Hence, value of items -- value in nonmonetary items preserve their value much better. So that's where you can see people use their wealth rather than putting into money, they put into nonfinancial items or asset or either they put in relatively stable foreign currency than what you see in Argentina when the pesos was in -- went into hyperinflation, they hold your money in USD, which is the most stable foreign currency. So the amount of local currencies are reinvested i.e., the local currency lose their purchasing power. Basically, they are actually converted into nonmonetary items or into another foreign currency, which is more stable. Second, monetary items are normally expressed in the terms of other stable foreign currency, for example, your rent, your salary and so on, they are quoted in -- for example, in Argentina, again, we use USD. And the other thing is prices for credit sales and purchases, they are comforted to compensate for the expected loss of purchasing power. So in those countries, what happens is the index basically credit sales and purchases because money loses its purchasing power in a very short period of time. So this are actually indexed in order to compensate for the expected loss of purchasing power. So as you see from the fourth point, interest rates, wages and price are linked to a price index. And the last point is that what I mentioned earlier, the cumulative inflation rate over 3 years is approaching of assets 100%. So this quantitative factor is something that we normally use in order to see whether a country is in or approaching hyperinflation, okay? So for Turkey, you went into hyperinflation since April 22. And from our experience, right, once you go into hyperinflation, it's quite difficult for them to come out until there's a change of economic policy. So as of March 2024, the [indiscernible] still reports a 3 years cumulative index of 309. On a 12-month basis, it's 68. So until the accumulative serious inflation falls below 100, then only the quality indicates that Turkey will cease to be hyperinflation. So we're looking at the current economic indicators, we think that Turkey will remain hyperinflation, and IHH will continue to account for IAS 29. So that's the bad news, okay. So IAS 29, the objective of IAS 29 is essentially, they want to make sure that the franchisees image remains so-called reliable and relevant. So they represent the financial information in the measuring units, which is current at the end of the reporting period because money has lost its meaning it's -- or rather money cannot maintain its purchasing power. And given the passage of time, the purchasing power of money is eroded, hence, you have to reinvest basically any monetary items using indexation as well as nonmonetary item as well. So essentially, they introduce the concept of trying to use an index. And only this index, which is used as a general price index to reflect the general economy of the country itself. And the idea of reinvesting in the financials of prior period, so then the financial statements are compared like-for-like. So it's very important that the presentation is consistently presented. So one thing of IAS 29 objective is they're trying to ensure consistency of presentation rather than the accuracy of numbers because they believe that by ensuring consistency of presentation, at least the financial statements are comparable. So this is what the setters believe that IAS 29 will give more relevant information to stakeholders. And the third thing is with IAS 29, we will try to illustrate the gain and loss on the net monetary position due to the changes in purchasing power in the P&L. So then you can see because of the changes in purchasing power of monetary items there is actually a reluctant gain or loss arising on a net monetary position. So hence, if we have more net monetary liability, you have a gain. If you have a more net monetary asset, you have a loss. So having your net monetary is quite important to show that whether you have a gain and loss arising from purchasing power. So it can be both a bad or good thing depending on how much net monetary position that one has at the end of a reporting period. Okay? So just to walk you through to our financial statements presented in historical costs and versus the hyperinflation adjustment. The reason why we are trying to show this is just show if historical costs, financial statements are not adjusted for IAS 29, you can see how the information becomes less relevant and useful as compared to what IAS 29 tries to achieve to make sure that the financial statements remain relevant and reliable. So let's look at historical cost. The example here we give is inventory that was purchased on the first of January 2023. This is in Turkish lira, which is TRY 500 per unit. The inflation factor for the year was 100%. So we assume that here, we assume inflation can be fully passed on to the customers. So whatever you can sell yourself. The commercial factor is, therefore, based on the inflation rate, it's 2x, okay? So looking at the statement of P&L, beginning of the year, the revenue is captured as 1,000. Because of inflation of 100%, the revenue has become double. The cost of sales remains the same because the same inventory was purchased on the first of January. So as a result, the gross profit, as you can see, when it was sold -- hasn't been sold in the beginning of the year, the same item will only get a GP margin of 15%. However, we're not doing anything just because of inflation, if the -- because of the increase in prices, the gross profit now has jumped to 1005, it gives a GP margin of 75%. In a way, we're not adjusting for inflation, it looks that the business has become far more profitable even though the business has not changed. It was only one item that was bought and sold without changing anything, basically, the business gives the misleading picture that it has become more profitable, okay? So different period -- as you can see, just because it was sold in a different period, the revenue growth is showing differently. So you can see the power of basically inflation, it makes the business look far better than what we actually perceive. So IAS 29, what IAS 29 try to do is try to adjust for it to ensure that it's like-for-like, taking the same illustration, as you can see, when we have a conversion factor, the revenue is adjusted. So the current -- the sale at the later December has not changed because that is really reflected in the current purchasing power. However, the sales that was made on the 1st of January because that was done a year ago, so it has to be reinvested to reflect the loss of purchasing power. So when the revenue is reinvested, the cost of sales is also reinvested, therefor, the gross profit remains at 1,000. So therefore, the GP margin remains the same. So as you can see, IAS 29 tries to make sure that basically, the presentation is considerably showing so that the information is comparable. Hence, this does not give a misleading picture to the business, the business is just performing no worse or no better than what it was previously performing, okay? And now I'll pass on to [indiscernible] to take you to the Session 2 and 3.

Yes. Thanks, Tiang. So I will move on to illustrate in a simple example how -- what do we mean by reindexing the balance sheet and then reindexing the profit or loss statement in a Turkish subsidiary, then we will move on to translation to IHH group numbers. So reindexing -- bear in mind, the Section 2 entirely will be talking about Turkish lira, Turkish subsidiary. So for the Turkish subsidiary, because they are in a hyperinflation economy, they need to reindex their historical cost. So the formula is just using the historical cost. Now despite all the amount when the underlying transaction was initially recorded, multiply with the conversion factor. Conversion factor means the changes of the purchasing power in the period. So how do we calculate the conversion factor. So first, we will identify the applicable general price index like Tiang mentioned. So in this case, we have the consumer price index published by the Turkish Statistic Institute. So you can see we're looking at March 2024 compared to December 2022. It has a cumulative inflation at 89.6%. And the factor is like -- or if you buy a new asset in a March, you will have a factor of 1 because you are buying at current purchasing price. And likewise, if you buy the asset in December 2022, you will have a factor of 1.8959. How do you calculate the 1.8959 is basically you just use the commercial price index, the CPI in the March reporting debt causing over the transaction that the CPI, then you will get the 1.8959, which is also equivalent to the 89.6%. Of course, the rest, if you see September, it was 1.26, is different from the cumulative because it's looking at a comparison between September and the March change in purchasing power. So with the conversion factors, you need to identify what are the monetary asset and nonmonetary asset because for the balance sheet perspective, we are only restating the nonmonetary asset and liability because those are at here historical costs, those are not measured at the current purchasing power. And what we are trying to do is we are reindexing by applying the change in the general price index using the conversion factors we are identified just now. So monetary items are those monetary assets and liabilities that are measured in the current currency unit.

Just to bear in mind, when you look at the balance sheet, the balance sheet basically has rebalances at the year-end. So most items at the year-end are already stated at the current purchasing power at that period end. So essentially, what ones we will have to do for the balance sheet is to break down between monetary items and nonmonetary items. Monetary items, you do not need to do anything because they are already stated because bear in mind, this is the balance sheet. So the balance sheet is already stated at the year-end balance. So there's no investing required for monetary items. Whereas the nonmonetary items, especially those that are kept at historical costs, those needs to be -- bring up to speed. So that's where you have to reinvestment to reflect the current purchasing power because these items will all transact prices in the past. So as a result, this has to be brought forward. However, for nonmonetary items, which are carrying a fair value depending on the valuation model or basis, these are typically not adjusted for hyperinflation because they are already reflected at their current cost at the end of the reporting period.

Yes. Okay. So if I bring you through the concept, just now, we apply to a simple scenario. So we go for a historical cost on. So this is a balance sheet just based on a single PPE, and there is no addition of PPE FY '23. So just to show you when we are restating a single PPE from the beginning to the end, how do we restate those nonmonetary item in a simple balance sheet using a conversion factor of 1.15. So we include some example of the useful [indiscernible] is 4 years and Turkish tax rate is 25% to calculate the depreciation and the deferred tax impact later. But if you just look at the historical costs, it's a very simple, December '22 to December '23 is just additional depreciation of 150 from 450 total assets go down to 300. So if we start off with this simple balance sheet comprised on your nonmonetary asset. So first off, we -- this is not the first year as it's in hyperinflation. It's already in hyperinflation in 2022 starting April, right? So there are some IAS 29 adjustment already made in the prior year. So first, we still need to include those adjustments in sight. And therefore, this is the first building block, you include the prior year IAS 29 adjustment. Then after you get the last year amount, you will multiply or reindex it to the current purchasing power by the commercial factor we illustrate in the [indiscernible], 1.15. So you -- for example, in PPE that you will be from 1,300 goes up to 1,500 at cost. And therefore, lastly, after we reindexed this is still looking at December opening balance, right? The current year movement will be the depreciation and deferred tax adjustment. So we will need to calculate the depreciation and defer tax separately. For example, the depreciation, we will calculate using the restated bigger amount, 1,518. Then the useful is remain the same for years. So you will get 380 depreciation compared to historical comments, we are just having 150 depreciation, right? So likewise, for deferred tax impact, deferred tax impact also is based on the temporary difference arising from the IAS 29 adjustment. So in this case, we -- let's assume the back space is same as the PPE NBV before IAS 29. So in the historical cost balance sheet, you would not see any deferred tax impact. But because the reindexing of the PPE, it will now give rise to a bigger accounting base compared to the unchanged tax base, therefore, it gives rise to the taxable temporary difference side. Therefore, you would have IAS 29 adjustment compared to 0 in your historical cost. And of course, if there are assumption that there are no changes in the tax base, then likely your IAS 29 adjustment for the deferred tax, meaning when I heard report in the interim figures, the IAS 29 adjustment talking about a change before and after IAS 29, we should be arising from the order coming from the order -- coming from the IAS 29 adjustment related to the then multiply with the effective tax rate. So for example, in this case, we have a PPE NBV 759, right? The tax base assume if no IAS 29 adjustment, you will see in the historical costs, NBV will be the 300. So the temporary difference is 459 and multiply with the 25%, you get by 115.

So in short, deferred tax is actually adjusting for the temporary difference between the accounting base and the tax base. So assuming when there's inflation, so IAS 29 adjustment comes in, assuming it does not impact the tax base. Tax base remains the same because tax rules are tax rules. Tax rules are not affected by accounting changes. However, the accounting base are affected by IAS 29. Remember, we tried to make a nonmonetary balance to be relevant. So we adjust for the current purchasing power. As a result, that the accounting base increases when the accounting base increases, the temporary differences also increased. And therefore, there has a category impact on your deferred tax, be it deferred tax asset or deferred tax liability. In this case, the asset, therefore, the temporary difference will give rise to a bigger deferred tax liability.

So you can see a decreasing deferred tax liability here. But this is because we are showcasing a simple scenario where no addition of PPE. So if you realize, you likely will have additional PPE during the year, and therefore, the current -- I mean, why is decreasing in deferred tax liability is arising from the additional depreciation during the year, right? This is without the addition of PPE during the year. So if there are additional PPE during the year, likely, you would not see a decreasing deferred tax liability, but maybe is increasing in deferred tax liability, just to give a complete picture. So if we -- 1 step back and see what are the IAS 29 adjustment in the SOFP between historical cost and hyperinflation, you can see the 459, which is the 759 minus the 300 is the IAS 29 adjustment for our balance sheet that you will report in the interim reporting. So what it comprise of, it comprise of first, the IAS 29 adjustment in the 2022 to 540. And then the reindex of the opening balance, 149, which is the -- just December minus 900. Then lastly, you will also have an additional depreciation. So depreciation during the year without IAS 29 is just 150. But if you're using the restated higher number divided by 4, you get 380, which means your IAS 29 adjustment for depreciation will be 230, which if you compare and contrast with the prior year IAS 29 adjustment 180, you will see it generally will be year-on-year become larger because it has both the impact coming from the cumulative adjustment with -- plus the current year reindex effects. So current year, there are changes in the purchasing power. Prior, you will also have those IAS 29 adjustment in the prior year, plus the index to the opening balance. This move up, then you will calculate the depreciation. And therefore, generally, you will see depreciation will be higher than the other P&L items affected by the IAS 29. So in short, depreciation amount will be affected by both the conversion factor and how much the remaining useful life because in our case, it's 4 years, right? So if already end of the July, then likely you -- the additional depreciation will stop there. But if you have the continued holding asset and restate each year, assuming the inflation is getting higher and higher, you will likely see a bigger year-on-year depreciation. So we have covered both the depreciation and the deferred tax. This is just a quick recap. So you will basically see 4 key elements inside IAS 29 reindex profit and loss statement. So the first 2 items, of course, we cover just now is the depreciation and the deferred tax, you recalculate the depreciation, you recalculate the deferred tax based on the IAS 29 adjusted balance. Then because these are already illustrated in the previous one, so we will move on to the next 2 elements, which is the P&L reindex effect and the monetary gain or loss. So P&L reindex effect is you are not only indexing your balance sheet nonmonetary items, you also reindexing the profit or loss because of historical cost, profit or loss, generally report income and expenses that were current when the transactions happen. So let's say, you have sales in January. It will happen in January, but we doubt those change in the purchasing power during the period. So the IAS 29 also required all the P&L items are presented currently in the current cost based on the transaction date to be reindexed to the current purchasing power at the reporting period. And lastly, we'll be the monetary gain or loss that touched on by Tiang just now already. So I wouldn't go in detail, but basically, the -- when you have monetary items, you were exposed to a change in the purchasing power, and if you hold more monetary asset than liability, likely you will have a loss in purchasing power. Likewise, if you hold more monetary liability compared to a monetary asset, you will have again in purchasing power. We will go through this concept in a simple scenario later. So basically, these are all 4 building blocks for you to understand SOTL after IAS 29 adjustment. So let's go through using the similar example that we go through in the objectives slide, but breakdown in the building block, how to get that. So first, we have the January before IAS 29. So I won't go into detail. But basically, what you need to do is because January 2023 is historical, right? So we will reindex to the current purchasing power, applying the conversion factor. Then in -- for December because the December revenue is already [ current ] on the reporting. That means when you sell the goods in December 2023, the purchasing power has not changed yet. It's still you are selling it in the current purchasing power. And therefore, you don't reindex further. But for inventory, because you buy back then in January 2023, you need to reindex it to the 1,000, so that's the second building block. You will have the year-to-date before IAS 29, which is the -- you have a PBT of 2,000. And year-to-date after the IAS 29, which happens to be the same amount because in our case is the inflation is fully passed on to the customer and therefore -- and obviously, the same amount, but one missing item you can see in the yellow boxes, we need to calculate the net monetary gain or loss. So December '23 is already recorded and current. So you can see we don't reindex it further. Then we will move on to net monetary gain or loss. So, net monetary gain or loss will typically be opposite of the IAS 29 adjustment of the reindexing that we do for the balance sheet, SOFP and SOPL just now comprising all the nonmonetary net asset, show the equity and item inside the P&L and OCI. So if we apply a formula by basis, then the MGL in a way could be derived as the balancing figure because it's opposite of the IAS 29 adjustment that increased the nonmonetary items, right? So I show you in a formula basis, you will see this is the formula that we all are very familiar, asset equals to liabilities plus shareholder equity. So asset, for us, typically we will comprise nonmonetary plus nonmonetary asset, right? And liability likewise, is the same and shareholder equity will be share capital plus retained earnings. So if we break down to what we want to achieve with, first, the monetary asset and monetary liability on the left-hand side. Then the right-hand side will be the nonmonetary liability plus the nonmonetary asset plus shareholder equity. And we know the monetary items are gradually losing purchasing power throughout the period of inflation. We want to showcase the monetary gain or loss for the monetary position on the left-hand side. What we're trying to derive the left-hand side is by looking at the right-hand side. If we increase the normal nonmonetary assets or increase the shareholder equity, it will give us 1 numbers that we can use to come out with the balancing figure to arrive at the monetary gain or loss at the left-hand side. We will go through example, don't worry. So if it sounds very difficult to grab now. So this is the same P&L that we just showcased in the previous slide. So I want you to pay attention to the bottom half. So first, we have the historical cost January SOPL for [ info only ]. But what we are trying to do is we have the December balance sheet. So first, we go to the step by step, we need to identify which are nonmonetary item, which are monetary item, right? Then we apply the commercial factor accordingly, then we get to the last column. So if you see the last column, it's not balanced. You can see that the share capital and inventories after the conversion factor is 4,000 and 6,000, respectively. And the net asset and net equity are not the same. So what we need to do is we need to find out the balancing figure. So if I just use the 4,000 after IAS 29 minus the column I before I before IAS 29, we get to 2,000 differences or IAS 29 adjustment for the inventories and then 3,000 for the share capital. What we missed in this case, why they are nothing coming from the SOPL, it just happens to be the before and after it's actually the same result. If there are different results, then it will have figures here. What we need to come out is the balancing. So you can see that it's a negative 1,000, meaning it's a loss in 1,000, then we're talking in the SOFP balance sheet, then it also bodes to. You need to report inside the P&L as per IAS 29 requirements. So you can see that after the IAS 29, your SOPL, no impact on the GP in this case, because the inflation has fully passed on to the customer, but PBT adjusted will be impacted by the monetary gain or loss. So we go through how to get the monetary gain or loss, right? But what does this mean? Let's put it back to the formulary, just now to give you a better picture, then we can explain what's the movement. So yes, we don't have any nonmonetary liability. Then the nonmonetary asset is the inventories we reindex higher. And then the shareholder equity will also reindex higher. But one is on debit side and one is on credit side, right? Then net-net, it will be a credit IAS 29 adjustment for 1,000, then how -- what we mentioned is a balancing figure. So we will have a net monetary loss of debit 1,000 in the left-hand side. So the equation is equal. So what it means in the story. So I should actually held the monetary asset of TRY 1000 in January 2023, right? If we use to purchase inventories back then, you can buy 2 units because the Tier inventories is only TRY 500 per unit. Give me a second. Okay. Then the monetary gain or loss means that it represents a loss on the general purchasing power of the net monetary asset held during the period of inflation. So the factor is 2, then the check change purchasing power is 1, and therefore, the Turkish lira 1k, at the time the 1 will be loss of 1k. So what it means in December 2023 is the monitor asset because we continue hold the receiver, the receiver subsequently call it in cash. But all in all, you still have a net monetary asset throughout the period of inflation of 1k. And now it can only buy [indiscernible]. So actually you need 2 Turkish lira of 2k, at the same quantity you can buy back then in January 2023. So that's how we say that because you are maintaining and monetary position, therefore, you lost 1,000. Of course, IHH currently is reporting for the asset, but there is -- it's not monetary -- again, it's not a monetary loss. Because our IHH or the asset by them is actually having a net monetary liability position rather than net monetary asset position. Why we use the net monetary asset is going to show you, it's easier to flow from the asset side, I can see what it means in loss in purchasing power. Likewise, monetary loss, if you have more monetary liability, it means the creditor has a loss in purchasing power, and therefore, you have a gain in purchasing power. Okay. So this last -- before we move to Section 3 is the relationship between the monitory gain or loss versus inflation. So typically, if you have a net monetary asset position, average net monetary asset position, you will -- and the [indiscernible] or the balance is significant. And the inflation is drastic, then you will expect you will see a higher monetary loss in that particular period. Comparing contrast, if you have a stable inflation, or the net monetary asset position is actually close to ready [indiscernible] because you have equivalent monetary liability to offset with the monetary asset then you will likely see a lower exposure. Likewise, for monetary liability position. If you have an average net monetary liability position and has a significant amount, then likely, you will see big gain during the period that you see a drastic change in the inflation. And then you will see a lower gain or minimal gain if the inflation are stable or you only have a low balance net balance of monetary liability. Yes. So that's the Turkish lira slide. So how about the IHH Group slide. So for what reported in the IHH in MYR amount for the -- IAS 29 adjustment includes 2 things, 2 elements. One is the reindexing event. And another one is translation effect. One is coming from the change in purchasing power, another one is coming from the ForEx movement. So typically, these 2 will offset each other. When you see inflation, slightly the foreign currency in that particular country will go down when try to covert to a stable presence -- stable currency. So what it means is when you see the IAS 29 adjustment in IHH interim report, the left-hand side will show in MYR, what the reindexation adjustment is, which is typically the reindex effect multiply -- in Turkish lira multiplied with the closing rate. Then what you see from the translation side will be all your -- Turkish lira amount now currently reindexed in the SOFP and SOPL. Those need to be all translated at closing rate because after reindexation, all your items are presented in the current purchasing power in the current unit measure in the reporting end and it should be translated using the cruising rate rather than average rate, for example, for the profit and loss. So particularly, you will see a translation difference for the balance sheet is between the opening and the closing rate. So you have an opening in the comparative presented in the MYR, then using a certain translation, closing rate at that point of time and you compare with the closing rate in the current year, and you will get the translation differences in the current year as well as the SOPL between the transaction exchange rate and the closing rate exchange rate. So these 2 will offset each other, which we will illustrate you in a simple scenario. But ideally, if the exchange rate reflects the change in general price index. Typically, the reindexing effect will offset with the translation effect before consolidated into the IHH Group financial statement, which is presented in the stable presentation currency. If -- it goes hands-in-hands, likely you will see both effect offset and therefore, you will see the same result being consolidated into IHH Group reporting. But that is the ideal scenario typically real life. It won't go -- move in so align. So also just to give you a context, if you don't apply IAS 29, the historical cost financial statement will show the Turkish subsidiary actually exposing to the significant fluctuation of the exchange rate because it don't have a reindexing effect to offset with. So you will likely see the financial results somehow is going down because of the ForEx is also going down when consolidated into the IHH Group financial results. So I'll just give you a picture on the chart on the movement for the direction of the inflation and the direction of the Turkish over MYR rate. So you can see in January to December, CPI inflation rate is 64% and January to December 2023 is 65%. But you can see that Turkish lira over MYR exchange rate amount is not moving in the same quantum or comparable is go down by 26% in the first year and second year is go down by 33%. So in real life, it will not go hands-in-hands, and therefore, you will able see a certain amount of the IAS 29 adjustment in IHH Group report. So if we illustrate it in a simple SOPL, combining the effect in the previous slide, meaning that we also include the depreciation and the tax expenses. So the historical cost side is translated using the spot or average rate. So what it means is the revenue in January and December, we have different opening closing rate, right, and you apply the rate accordingly then you will get to 549, which the cost of sale is also doing the same thing. But the underrate is just -- 549 over [indiscernible] 0.18, right? So this is according to IAS 21 translation procedure before hyperinflation. If after hyperinflation, you will need to use the closing rate what we mentioned. So first, we use the reindexes SOPL amount, which now you will see the higher depreciation than the MGL. Now we make the MGL into a gain to reflect the -- I mean, closer to what IHH is reporting. So you can see the amount is like this. And because all these SOPR items already expressed in the current purchasing power, so it cannot goes back to the previous spot rate at the time and it should apply the closing rate. So if we put 2 together. So you can see that in the Turkish lira, the reindexing effect is quite high, 33% for revenue, for example, and 153% for depreciation, for example. After you do both, the first reindexing and then translate using a lower currency rate. You can see the variance is actually going down. So just to give you a context of these 2 translation -- versus inflation will give offset effects. So you can see the depreciation for example is just 102% compared to 153% and of course, the MGL is the -- another element introduced by the IAS 29, right. But just to give you a context, if without the restatement then you will just see a lower financial result from the Turkish lira, right? Then the last thing is the IAS 29 adjustment reported in IHH in MYR. So it typically comprise of 2 items. For example, the revenue 81. It comprised first, the reindexing effect, the 157, I mean don't mind how we calculate that. But typically, we just want to tell you, when you see a number inside IHH interim report for IAS 29 adjustment, it means 2 things. It means include the reindexing effect, which is coming from the change in general price. So -- and then the translation effect coming from the change in the ForEx going down. So you cannot just see our IAS 29 adjustment for revenue is 100%. That means I should see the change in -- it increased by 100% in the purchasing power. It's not the case. First, you will see how much it changes in the purchasing power, then you also need to look at how much it changes in the ForEx to come at the IAS 29 adjustment reported in MYR in IHH report.

So essentially because for IHH is in a stable currency. So because you have a subsidiary in the hyperinflation, there are 2 impacts. One, the hyperinflation impacts the purchasing power in the country itself, in the subsidiaries environment. So that shows the loss of purchasing power. But bear in mind, because interest rate moves in the commerce direction to exchange rate. The translation and exchange rate also has an impact. So you have to factor in the exchange rate loss as well. So when IHH accounts for [indiscernible], there's actually 2 things to watch our for. One is IAS 29 because of hyperinflation. But bear in mind, hyperinflation also impacts the foreign currency conversion. So Turkish lira converted to Ringgit Malaysia, there's also a lot of currency devaluation. So that is the second impact. So be very careful to compare those 2.

Yes. I will pass on back to Tiang to wrap up the subsequent sessions.

Okay. Session 4 is essentially what we're trying to do in a nutshell, how are the IAS 29 adjustments apply to IHH financial results. We don't -- we won't go into detail but just on a high level to stay basically, when you look at the IAS 29, what does it actually mean. So okay. So basically, for historical costs, historical costs does not have any IAS 29 adjustment. So from the balance sheet, CapEx represent costs incurred. These are costs incurred in the past, which means it's simpler to compute the return on asset because you know what you've expended in the past, you look at the returns and that will give the returns on value asset. Basically, we expect the net cash flow to be more than the initial investment or else you will have an impairment, okay? Then we move on to the profit and loss. The financial performance reflects the transactor amounts. The period-to-period comparison. It basically gives you an indication of how well the company is performing from a profitability point because there's no -- inflation is relatively stable. So you can compare from year to year, it is not distorted by interest rates. So if you have inflation, of course, then you have higher costs in the subsequent period. Therefore, you're not comparing apple-to-apple anymore. Thirdly, the transition to MYR basically to the presentation currency of your holding company. The Turkish subsidiary financial results will be fully impacted by the fluctuation in exchange rate. So because if you have hyperinflation, the currency will be devalued. So that also affects the comparison from a historical cost perspective, okay? And then looking at -- if you include financial results with IAS 29, what does it try to do? So from the balance sheet, right, the nonmonetary assets now has been adjusted. So it's better comparability compared to similar assets purchased in different periods. Without the IAS 29 adjustment, a car purchased today compared to a car purchase a year ago is the same car, but you have different measurements. So IAS 29 to adjust, so you compare like-for-like. So it allows comparison from period to period. We are IAS 29 that comparability is gone. And if you cannot compare, you cannot make decisions well because you're not comparing like-for-like, okay? So from the P&L, the financial performance also tried to set the inflation effect away from the core operating business. So then you can compare period-to-period change because we are doing so you can -- one can wrongly attribute the business performance to inflation so-called effects rather than the productivity of the business itself. So IAS 29 tries to negate that by showing that, look, from a business point, solely on their operation, this is how well the business has performed. And they have put in monetary gains and loss to show that there is a decline in purchasing power in terms of our monetary items. And then lastly, basically, the Turkish lira to ringgit Malaysia translation is also offset by the inflation during [indiscernible] effect. So that basically reduced the Turkish subsidiaries financials, which has actually been impacted by the [indiscernible] fluctuation. So it kinds of neutralizes. So it to be more comparable. Bear in mind that you shouldn't be taking results they have IAS 29 comparing to the historical, it's like comparing apple to oranges, different fruit tastes differently. Of course, you will not know what you're eating. So we always make sure when you want to compare, compare like-for-like. So if you want to compare historical costs, make sure the current period is also historical cost, the past is also historical cost, but then comes with the advantage in disadvantage. Likewise, when you want to compare with IAS 29 adjustments, you should also compare the comparative with IAS 29 adjustment. If you do not do that, you are not comparing like-for-like. And therefore, the results will be pretty mixed, okay? So that explain, basically, the point to take from this slide is when you make period-to-period comparison, it's important to know what you are comparing today compared to what you compare in the past, both must be adjusted on the same basis. Either you decided to [indiscernible] IAS 29, both -- the business must be the same or else it's not meaningful. Okay. Moving on. So let's take the IHH Groups, but timing for quarter 1. The difference -- we are just trying to illustrate, this is what management has tried to illustrate with IAS 29. They are just trying to illustrate the effect of IAS 29 into their financial statements, the results on the right-hand side is what is reported in the quarterly announcement. So we are trying to show the movement in IAS 29 and why the IAS 29 movements are -- what are the reconciliation items to the number that was eventually reported, which reflects IAS 29 adjustments. So the first one you have basically IAS 29 depreciation and amortization. Remember, these are not material items because you have the reindex. Basically, the current amounts of these have now been reindexed, and therefore, the depreciation and amortization amounts are actually higher okay? So that's one. Then basically, the factor there results in this increase is the year-on-year CPI, means quarter 1. Because bear in mind, the opening balance already has the reindexation effect from the prior year, so you do not need to reindex that. However, for the quarter, there has been year -- already quarter-on-quarter changes of 68, that has to be taken into account. So that results in a higher depreciation and amortization. So also by the closing rate and therefore the [indiscernible]. So bear in mind, when you reindex, the current amount is bigger but [indiscernible] remains the same. So it's still amortized over the remaining [indiscernible]. Of course, as time goes by, the [indiscernible] will become smaller. So [indiscernible] inflation does have impact in the depreciation structure. It's kind of a snowball essentially, especially if the inflation rate still remains rampant. So you will be seeing this effect. So the depreciation charge will just snowball, it gets bigger and bigger because the prices are still increasing, but your useful life will becoming shorter and shorter. So the depreciation charge over time will just increase, okay? So this is what we have anticipated. And then, of course, this is offset with the translation effect from your lower exchange rate. So sometimes you don't see this because remember, the Turkish subsidiary is actually consolidated into the group. So when the group consolidated to take in basically Turkish lira, which is converted into the [indiscernible] currency which is ringgit Malaysia. So remember, higher inflation rate also meets greater currency for the Turkish lira. So that is offset by the Turkish lira. So there's nobody -- depreciation effect may not be -- so apparent because it's actually offset by the translation effect when you so-called consolidate the Turkish results into the Malaysian parent books because that is reported in the presentation currency of ringgit Malaysia, okay? Moving on, as you recall, the carry amount of PPE and [indiscernible] asset is higher. So your accounting base is higher. Therefore, you have deferred tax. What has happened is the Turkish tax authorities has given deferred tax credit as a relief. This is given by the authorities. The timing of this is nothing to do with accounting. So it just depends on when the government grants. So in this instance, it's a onetime effect. So in quarter 1, you have this deferred tax credit given by the Turkish authorities to give them the relief because of the higher inflation impact that increased the carrying amount of your accounting base for your PPE, you will have a higher temporary difference, especially to a higher prefer tax liability, the government then gives a deferred credit to offset that. So however, deferred tax liability and the deferred tax credit do not goes hand-in-hand, because one is driven by accounting. The other one tax credit is given by tax authorities. So unless you have timing, you have to detect new concession in terms of timing, okay? So next one is the net monetary gain. So this is the net monetary essentially depending -- the Turkish subsidiary, I believe has the net monetary liability. So because it has a net monetary as of reporting date, overall reports again, and this gain is reflected by the 131, as showing us here, okay? And these are the factors that results in [indiscernible], okay. So next. Next is the tax expense. Tax expense, as a result of hyperinflation, you also have to pay more tax. So overall, the change in CPI has impact on your current debt and also your deferred tax because of the [indiscernible] differences and also your test base will also have to be in that, which will then increase your deferred tax expenses. So the effective tax rate essentially will be affected. Of course, the effective tax rate is also brought down because of the exchange -- the weaker exchange rate by the Turkish lira and essentially this -- as you can see, the estimated IAS 29 tax expenses, okay? Moving on to the last session, which is on Section 5. This is on IAS 29 impact on cash flow. So the example here is the conversion factor for the changing purchasing power assuming [indiscernible] conversion of 2. The average inflation for the period is 41, assuming that the movement occurs on flat out throughout that period, the monetary gain or loss arising from reinvesting arising from the borrowing opening mines and the carrying movement is recognized in the P&L. So for borrowings, right, the historical movement in Turkish lira will be shown as this. There's a drawdown of final as well as the repayment. So no monetary gains, closing balance is 800. As you can see it's just a reconciliation, 100 plus 5, minus 7, therefore, close at 800, okay? So if you have the conversion factor because of the loss of purchasing power, and bear in mind your borrowing is monetary liability. Therefore, the reinvest movement is shown as it follows. And we assume the commercial [indiscernible] of 1.41 is basically the average inflation for the period. So we average it. And therefore, the closing balance here in order to get back 800, you have to have the balance sheet of 918. This shows that basically you have a gain arising from your monetary liability. Because of the loss opportunities power, you actually pay less in terms of -- in money terms essentially. So all in that -- that means all items in the statement of cash flow are reindexed by applying the conversion factor from the date where the transaction of it. So of course, there has practical difficulties. So what we typically do is we did an average. We don't go down to the exact date because that would be quite gigantic task. So basically we mentioned, we take the average for the month or for the quarter. Okay? And because borrowing is a monetary item, the year-end borrowing does not need to be reindexed, because it's always stated at the current purchasing power. What has to be reindexed as you can see, the operating balances were stated at the purchasing power at the beginning of the year. So they have to be adjusted. So compared to last year and this year, there's a commercial factor of 2, as we adjust by 2. And the drawdown and repayment because we assume that this happens evenly throughout the period, therefore, the average inflation is 41, the conversion effect is 1.41, we have readjusted. So from a monthly perspective, you can see that basically, your monetary liability has lost the purchasing power, which is the gain to the company of 918. So we can see what IAS 29 tries to do is it tries to make the cash flow relevant. Okay. I think this is the last slide. The hyperinflation impact to cash flow. Bear in mind, for IAS 29 adjustments in the cash flow, bear in mind that the cash flow amounts reported in the reindexed cash flow may not equal the actual cash flow because the reindexing 29 depends 2 things: one, on the many of the inflation; and second, on the composition of the entity assets and liability, i.e., how much are carried in monetary and nonmonetary terms. So the cash flow shown in the cash flow statement is not the actual cash flow, but rather it has IAS 29 adjustments inside, which is factored in by 2 things: one, the size of the inflation; and second, basically the composition of your balance sheet, how much of it are in monetary items? And also whether this monetary items, are they asset or liabilities. Second, other IAS 29 hyperinflation accounting, also to show you that the retails are also affected by the inflated amount in your balance sheet as well as your P&L. Therefore, when you reindex, of course, it affects our debt covenant because the debt covenant was agreed in contractual terms at the start which did not factor in the decline in purchasing power. So in such cases, right, it's important to figure out your lenders and try to renegotiate your debt covenants because it's no longer applicable. It has to be adjusted for the reindexation. If you don't, then you have -- is go under default. Okay? And cash flow impact in general, essentially when you have hyperinflation, it means there's higher cost for the business and which may not necessarily be fully passed on to customers. So you have higher terries for customers. especially the fixed income earners, which therefore were honorable to increasing cost. And hence, sometimes when our assets are reindexed, they have high carrying amount. You have to look at the demand. If demand is falling, then this is what we call an impairment indicator. You have to do impairment assessment. And then if you have impairment charge for that will have an overall impact on your P&L essentially. So the other thing to bear in mind from -- in terms of your currency for the foreign subsidiary respected in a country that's much more bigger. So your cash flows also exposed to foreign exchange fluctuation. So look at basically your customers, your credits and your lenders and you lessors may insist for their contracts to be priced in a stable currency rather than in the whole currency itself, which is very much bigger. Of course, the financing cost and cost of capital will also increase, especially if the Turkish government increased the interest rate to combat inflation and definitely higher CapEx because due to price increases, essentially to repay the same type of asset you have to have to spend more in the future just to get the same earning potential. We do expect the cash flow and discount rate for impairment assessment to reflect inflation. Or basically, when you say you do your impairment do it on returns new real interest rates essentially, rather than nominal interest rates, okay? So I think that wrap up our session and I will hand it down back to Penelope. We will now open up for the Q&A session.

Thank you very much, Tiang and [indiscernible]. That was a very useful session, and I hope those on the call was able to -- is able to relate to some of the concepts there. Yes. So I think let's start with the Q&A. I see there are 2 questions that have been put up on the Q&A chat box. I mean perhaps, Tiang or [indiscernible], you can address them accordingly.

How do we open the chat box?

We're trying to open the chat box.

Yes. Or maybe to read out the first question, which is from Tim. Is there a summary of adjustments that do not impact tax as direct adjustment of retained earnings or OCI.

We usually [ rethink ] earnings is not adjusted. The rest of the items are adjusted for -- unless, for example, what we mentioned, it is a monetary item as of reporting date do not need to be adjusted because that's already reflected at the current purchasing power. And other items, let's say, nonmonetary items, if they are at fair value of net risible value at the reporting date. Those also does not need to be adjusted because those are also stated at the current purchasing power at the reporting date. Everything else you have to adjust essentially. Retained earnings is not adjusted because it's just a balancing. So we don't adjust retained earnings. Does that answer the question?

This is Tim here. Sorry, may I jump in?

Go ahead, Tim.

I think one of my question is that I think during the whole adjustment, I see the impact is -- basically, they keep the P&L, right? But I think when I see the disclosure, I can also see some items during the adjustments, which is not passed through by the P&A, but it is adjusted directly into the retained earnings or -- retained earnings basically. So I'm just wondering, so is there any kind of summary of this item which doesn't have PAT impact during the whole IFRS 29 adjustment.

Typically, when you see pass through to the other comprehensive income, OCI, would be those translation effect for translating, Turkish lira into MYR for reporting in IHH Group reporting. So those will be all moving through other compressive income rather directly reflect in the P&L.

So Tim, remember, right, when you say when I consolidate the Turkish subsidiaries, there are actually 2 effects. So not all effect coming from Turkey is IAS 29. So bear in mind, because Turkey also suffer from a weaker currency. So the other impact you see is actually the currency conversion. So normally, the IAS 29 effects are usually if this current period, it's going to be watched through the P&L. However, there's another second effect. Remember, the Turkish subsidiary is now reported in Turkish lira, for which the exchange rate is much bigger compared to the presentation currency of ringgit Malaysia. That translation what you do for any other foreign operations if it translate, the translation effect is taken to OCI, it doesn't go to the P&L. Does that answer your question, Tim?

Yes. Probably, can ask one more thing?

Yes.

So just to check my understanding. Then I guess neither the adjustments will go through OCI or PAT, is there any case like you adjust directly to the retained earnings? Probably like the -- how about the opening balance? So I think for the opening balance when you index to the latest like the index, you need to make that adjustment, right? So for that impact, does it roll into the P&L or it's more like the direct adjustment to the retained earnings.

Yes. So you understand correctly. The retail earnings also is a nonmonetary item that need to reinvest for the operating balance. In the current year will be adjusted through the how the indexation effect affect the current year P&L, meaning when the transaction happens in the P&L, then move -- they will go to the retained earnings. Of course, like what you mentioned, we did mention because it's already passed the first year. So there will be a first year application effect on the retained earnings as well. Meaning in the -- back in the 2022, when IHH first time applying IAS 29, they are onetime adjusting the entire balance sheet and the balancing figure will go to the retained earnings. There is the -- need to reindex back to the acquisition date, like for example, asset balance is acquired by IHH back in 2012. Those are the big chunk of the reindexation goes back to the historic data afterwards, we will just reindexed the retained earnings year-on-year instead of going back over the way to the acquisition date.

When we do retained earnings. The rest of the items all good, basically P&L. So the onetime adjustment is the catch-up because when you first time apply IAS 29, the first catch up -- because you do reindexation from the time we acquired the asset from that to the [indiscernible], that they allow to take it to retain earnings. After that, any reindexation of item on the balance sheet goes to the P&L. Retail earnings, reindexation goes to retain. I mean, basically, it doesn't affect your operations, hence, it's not taken to your P&L. Does that have you Tim?

Yes. Very clear.

I believe we have another gentleman has raised his hand. [indiscernible], would you like to unmute yourself and ask the question.

Am I audible?

Yes. Loud and clear.

Great. So I got 3 sets of questions. The first one is at the beginning of the presentation, you said for the applicability of MRFS 129, there is no absolute level of inflation specified. Is there any time period specified for them to qualify as a hyperinflation scenario? So the circumstance in which I asked this question is, let's say, if you had 3, 4 months of very high inflation. And you're starting to see inflation moderating in the next 2 months. How do you decide the applicability of this basically? Over what tenure should require should the hyperinflation be in Vogue for us to decide whether this supplies or not? That's my first question.

Yes. So to answer your first question, number one, the standard itself does not prescript any absolute number However, as a practice because it's very important to ensure comparability within an industry or willing companies in a country or within different countries, whereas the standard setters between the accounting firms including the users, they have organization. So one measurement batch, which they use from a quantitative measure is basically 3 years, you must have at least 3 years consistently, cumulative 3 years more than 100% if you are 70%, you don't qualify. So let's say, in about 3 months, there is 200, and then they urn it taper down to less than that, we go back to the 3 years cumulative. So we do that on a rolling basis essentially. That's why for Turkey, right when we do on a 3-year rolling basis as of now, it still haven't come down below 100%. So the quantitative measurements are still there, okay? So you quantify for the so-called the quantitative, you start to do the qualitative as well. But the quantitative is a very clear signal essentially. Does that help?

Okay. I think that's what...

This is extremely important because the standard setter once -- when a country adopts hyperinflation, the rest of the world know that particular country is decided as hyperinflation. So being classified and getting declassified has to be agreed by everyone because we have to ensure that we can compare the financial statements in that particular country. And therefore, that country is also to ensure that the companies in that country also applies IAS 29. So IAS 29 is not a standard that anyone can say, "Oh, I want to be -- I wanted to have [indiscernible] and the rest, I want to adopt myself." You can't. You have to do it collectively. So 29 is a standard. It's a very unusual standard in the sense that, basically, you have to adopt -- everyone has to adopt one shot. Everybody goes in or everybody goes out. Does that makes sense? Because if you don't do that, then the companies within that country are not comparable. Does that makes sense?

Okay. Okay. Yes, yes. My second question is when it comes to inventory, there has to be a correction factor to factor in the hyperinflation also. But in your presentation, I noticed that receivables are actually stated at costs. And I presume that, that will be the same logic for payables. So in a case where an inventory is bought on credit and let's say, if that credit tends to be longer-term credit, let's say, 6 months or 9 months, you will be stating the inventory using the inflated adjustment cost where as payables, you will actually be stating at historical cost. So from a matching principle point of view, does that actually sound right? Or does it have the effect of overstating your current asset and possibly understating your current liability, assuming you bought it entirely on credit.

Assuming inventory is a nonmonetary item, right? So yes, because it's a nonmonetary item, you have to reindex it because we assume, at which point you bought the inventory and then you go in at that point of time. And then when you report, you have to do a reindexation, correct?

Correct.

So that's how you adjust. Whereas the payables and receivables, these are monitory items, right? The monetary item as our reporting date are always -- does not need to be reindexed because they are already reflected at their current purchasing power, correct? I mean that's a concept. But let's say, for example, the receivable, the same receivable that you have in the opening period and then you have the same amount as a closing period. That's why we point concept of monetary gain or loss. That's why we say, at the end of the day, if you have more net monetary liability, you will have a monetary gain because of the loss in purchasing power. So even though the monetary items appears to be the same, the IAS 29 adjustment has brought in the concept of monetary gain and loss to the fact that because your monetary items, even though it is not reindexed, there's actually a loss in the producing power. So that's adjusted for which is then -- basically, it corresponds with your nonmonetary items. Remember, your nonmonetary items, you have the reindexation effect. That's how it balanced out. So do you see now why IAS 29 is so important. Because if you don't adjust for IAS 29, basically, it becomes not comparable.

Basically, it will adjust through P&L, that's what Tiang trying to say. So for those nonmonetary items, it will restate by reindexing of the change in purchasing power. Monetary item will be adjusted through the opposite effect by including a monetary gain or loss inside the P&L.

Okay. Okay. Fair enough. My last question is in one of your slides with reference to IHH, this profit waterfall chart. You said that the Turkey tax authorities gave a relief which help them even book a tax credit gain as far as this standard is concerned. Is that gain taxable?

I think this is the tax credit. So basically, when the government give a tex credit, whether it's taxable, I have no idea, I'm just showing. So this is more of a IHH specific. About I think what the tax authorities were trying to do is because of hyperinflation, you have a big jump in your accounting base. And that accounting base has led on to a temporary differences, which then have a big deferred tax liability, which affects the P&L. So I think the government is trying to offset it by trying to give them a deferred tax credit. Whether that has tax implication, I have no idea. But from an accounting point, I mean, just telling you what has happened essentially.

I think we'll move on back to the questions on the Q&A tab. So another question that we've got is just to confirm, if the effects of currency exchange rates are incorporated into the MFRS 129 adjustment. Tiang or [indiscernible], you want to take that?

Yes. So, yes, the currency translation effect is incorporated. So there are 2 hands in this. First is the restatement effect is Turkish lira movement, right? And subsequently, when you translate in the presentation a of MYR, it includes both the before IAS 29 adjustment based amount plus the IAS 29 adjustment amount and you translate at the closing rate. So that will result in some translation effect, which just now the first person asking if it goes -- if it flows to other comprehensive income rather than P&L. So in short, there is a translation effect. It will apply to both the IAS 29 adjustment, the incremental part and the base amount.

Does that help? I can see the question here, can in break in what seniors MFRS is showing quarter-on-quarter revenue deterioration, but MFRS showing quarter-on-quarter improvement in revenue. So what [indiscernible] trying to explain, there are actually 2 movement -- there are 2 factors which are actually impacting. It's just not IAS 29. It's also your foreign currency. And of course, there's also supply and demand. So the number that I think we are giving the whole content is very hard for me to say exactly what impacts because other than these 2 factors, there's also the better of supply and demand. Your revenue go up and down because of -- and [indiscernible] supply and demand. So notwithstanding that, there's another 2 factors, which is the IAS 29 hyperinflation impact as well as our currency translation. We are currently weaker when you translate, of course, you've got smaller revenue. You see, I mean, so -- so it's hard to have -- I mean this -- the seniors are impacted by -- I mean, a very high level to the top of my district factors for the first -- in the first instance, essentially, okay? Any other questions?

We still have a bit of time.

[indiscernible].

We still have time for some additional questions, if you have, please do submit them on the Q&A chat box or feel free to raise the hand, so we'll be happy to address them. We are waiting for additional questions. Yes we can do one last follow-up question. Maybe I want to solicit some feedback. So the next question would be -- well, did this session, help you improve your understanding of MFRS 129? Great. I see that [indiscernible]. I'm happy to be able to help increase that understanding. And obviously, I know it's a journey that we need to learn for the audience here to better understand, it's a 50-50.

Penny, can I jump in? I've one quick question?

Sure. [ Shin], go ahead.

Yes. If I'm trying to compare Acibadem's performance, now versus, say, pre-COVID, what's the best way to do this since we don't have the restated 2019 P&L?

And when you say pre-COVID, it's before IAS 29 adjustments?

2019. pre-2019.

That is quite hard. Is that comparing -- well, I mentioned that comparing apple and oranges, you go, I mean, because when a country -- in any company, it's shaped by ramping inflation, to make an apple-to-apple comparison is actually quite tough. I mean, if you really want to see operations -- I mean, if we let say profitably, I'd go to operational numbers because that we can tell you. But of course, inflation does have an impact on supply and demand. But from an accounting point, that's the reason why they have IAS 29. So if you really want to see 2019, you basic -- by -- it's not like-for-like essentially. Does that help? I mean, you can try to do a reindexation of the 2019. So then at least you've got some sense for comparability [indiscernible].

So [indiscernible] that's in our investors back and all that, we actually show non-IAS 29 numbers to help us compare against the period where Turkey was not hyperinflation. So that is not official numbers, it's not statutory numbers. It's not audited, but it gives the readers an idea of how the numbers would look like on a historical cost basis.

[indiscernible] we try to prevent this because we are very -- we are concerned that when people compare it's not like-for-like, and then they get the wrong interpretation of that.

Thanks, Shin. There is another question on Q&A box. When will this MFRS 29 adjustment be abolished? Of, say, Turkey's inflation is controlled. And once it's abolished how will it impact the P&L and balance sheet and how to make sure it is comparable then.

First thing first, right, from a quantitative indicator, we need to see the 3 years derivative -- the 3-year rolling effect. It has come down below 100%. So that's for start. And then basically, the international community will have to agree on a date that they can exit. So it's not like any company can just exit. So once everybody says, yes, the key is going tom exit, then the companies [indiscernible] adopt. So then what happens, you just stop adopting IAS 29 basically. But then your competitive, you have to bear in mind, because the competitive will have IAS 29. So that's where I think you have to do some adjustments as well.

So to also add on the balance sheet side, the PPE and the diverse will be on the restated balance faster. It wouldn't go down to pre-IAS 29 figures. It will use the restate or reindex amount.

As a deeming cost.

As a deeming cost for the period that cease to apply IAS 29 adjustment. So you will still continue to see higher depreciation per se until that point of time.

So when -- as it right, basically, whatever [indiscernible] is the amount that will [indiscernible] as a deeming cost. Is that you have revalued on a higher basis, and this revalued amount from the time you stop your IAS 29, these are now your new costs going forward. And going forward, you just don't adopt IAS 29. That's all.

So it will be a new normal, that will be a new base.

Yes, that will be a new base, yes. But of course, you are starting with high depreciation. So....

[indiscernible].

Yes, so timing is very important. You can all say, the country, the international committee will have to agree when Turkey exits from that regime essentially. Normally for [indiscernible] had to come out so far. [indiscernible]. Any other questions?

Is any last burning question from the group here? And if there are no further questions, then I think -- I believe we can conclude this session. I think for those on the call, you will be anxious to find out if you're going to be circulating this presentation that for the recording. Rest assured, I think for the audience here, I know it does take time to understand the content and it's a lot of information here. So I think we'll share with the group of you that's on the call. So please do look up from the e-mail and the replay link from all of us. So if no further questions, then I think we'll end the session here. I would really appreciate -- actually thank you, Mr. Tiang and Mr. [indiscernible] for your precious time in giving us this insightful presentation. And I wish everyone a good afternoon. All right. Take care. Thank you. Bye.

Bye.