A study of some of the effects of price level changes on financial statements
Christensen, Richard W.
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The purpose of this study was to examine some of the effects of price level changes on monetary and fixed assets, and to compare and analyze the recommendations of the American Accounting Association and the Amerioan Institute of Certified Public Accountants in the methods of accounting for price level changes. The various publications of the American Association and the American Institute were used to present the views of these two organizations. Price level changes have a significant effect on financial statements. Accountants recognize this fact but are not in agreement as to the methods of computing the effects and in the manner of disclosure. The American Association and the American Institute are the two groups which form most of the accounting procedures in this country. In order to eventually account for price level changes these two groups will have to be in general agreement as to the methods to be employed. At the present time the American Association and the American Institute are in general agreement on price level accounting with only minor differences separating the two groups. One of these differences is over the choice of an index number for use in adjusting accounting data. Both recognize that at the present time the effects of price level changes on financial statements should be disclosed through the use of supplementary financial statements to accompany the conventional statements. In this manner the effects can be shown by comparing the two sets of statements and readers who are unfamiliar with the adjusted statements will not be confused.