An overview of inflation accounting in the United Kingdom.
Written in 2004; 2,250 words; 9 sources; MLA; $ 69.95
Paper Summary:
This paper discusses how the Accounting Standards Board (ASB) should adopt an inflation accounting methodology for the United Kingdom that conforms to the general global trend to the use of inflation accounting as a more accurate means of preparing financial statements. It looks at how the use of historical cost leads to distortions in valuation of assets over time with the distortion magnifying in periods of high inflation or assets that are held over long periods of time. It also examines how the adoption of a specific inflation accounting methodology would function to standardize accounting practices in the preparation of financial statements and allow more effective comparability of the financial statements of firms in the United Kingdom with those of other nations.
From the Paper:
"Inflation accounting is theoretically grounded on the need to maintain capital on an entity or proprietary basis and the need to properly value assets (Robson, The discourse, 197). From this perspective inflation accounting is involved with the need to accurately represent value. The primary difficulty with developing and implementing an inflation accounting method, however, lies with the concept of value, with varying interpretations of value in the perspective of shareholders, the perspective of corporate governance, and to some degree, from the perspective of fundamental economic theory. In addition, the uses of information regarding value can vary, with the information used as part of the decision-making process for each asset."
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