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By R W Scapens

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For this reason, the term 'price-level accounting' may more aptly describe the nature of the statement. ). Exposure drafts on the subject have also been issued in Argentina, Australia, Canada and New Zealand. However, the proposals have not become generally accepted. B. is reviewing alternatives to price-level accounting. In the United Kingdom the Inflation Accounting (Sandilands) Committee concluded that, while price-level accounting may offer certain short-term advantages, in the long run it does not provide a solution to the problems of financial reporting in a period of inflation.

Differences between the beginning and ending amounts represent, in a period of inflation, a loss in the case of monetary assets, and a gain in the case of monetary liabilities. P. accounts it is not normally necessary to compute separately the gain or loss on each monetary item. It is generally sufficient to compute a single figure for the loss or gain from holding net monetary assets or liabilities by evaluating in terms of period-end purchasing power the amount of monetary assets less monetary liabilities at the start and finish of the accounting period and to make a similar evaluation of the aggregate acquisitions and disposals of 28 Accounting in an Inflationary Environment Table 3•5 £C Net monetary assets (liabilities) at start of period Add acquisitions of net monetary assets (liabilities) during period Less disposals of net monetary assets (liabilities) during period (period end) X X X Sub-total Net monetary assets (liabilities) at end of period X X Loss (gain) from holding net monetary assets (liabilities) X monetary items during the period.

K. 2 8. 8 * Provisional. K. manufacturing industry. 8 These figures, however, do not include in profit the gains on long-term debt and, as may be expected, the price-level adjusted figures are lower than the historic reported figures. It is interesting to note that the evidence provided by this study and the work of Cutler and Westwick indicates that restatement of financial statements for purchasing-power changes will yield lower profit numbers on average than the reported numbers, whether or not gains on long-term liabilities are regarded as a component of profit.

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