lucasg85

Totally agree with the above, put another way
In EM you also have the risk of a high inflation or even a hyper inflation environment.

So problems that can emerge dealing with PPE is that it is carried at historic book when inflation was lower or before compounding effect of inflation over several periods begins to take effect. This effectively burns your long term fixed assets off the balance sheet and will distort efficiency ratios upward -were sales are higher (nominal terms) and the PPE is essentially in real terms (carried at historic book cost). Similary your leverage ratios get warped because of the smaller asset base leading to smaller equity on the balance sheet.

As stated above you also get an operating margin and gross margin that will be warped because of the tie between the historic book cost of ppe and inventory and the carried over depreciation and/or cogs estimate.