Current Value Accounting Neglects Liabilities

Abstract

separate problems. General price level adjusted (GPLA) statements address the first-the changing general purchasing power of the monetary unit of account. Current value accounting methods (such as replacement cost) address the second-the significant differences between current and historical costs of specific balance sheet items. Although GPLA accounting accommodates changes in the purchasing power of principal of debt, it ignores both the current market price of the debt and current interest rates. In theory, replacement cost accounting reflects long-term debt in terms of both current market value and current inter-