Accounting For Inflation: Past, Present and Future

Abstract

Abstract Various authoritative pronouncements have accounted differently for inflation. In 1976, the Securities and Exchange Commission (SEC) issued Accounting Series Release (ASR) No. 190. Three years later, the Financial Accounting Standards Board (FASB) adopted FAS No. 33 for a five-year “experimental period.” In 1984, the FASB issued FAS No. 82 which eliminated the Historical Cost/Constant Dollar (HC/CD) disclosure requirements for companies reporting Current Cost/Purchasing Power (CC/CPP) information. These authoritative pronouncements suggested that certain large-sized, publicly traded companies should use replacement costs rather than other methods of accounting for inflation. But should the importance of general price level information have been deemphasized ? The purpose of this study is to review various general price level adjustment (GPLA) techniques and to examine how they can help calculate replacement cost values. We compare and contrast the role of GPLA information on companies whose size ...