Accounting for Price-Level Changes—Theory and Procedures

Preface


1 Introduction


2 Price-level Statistics


3 An Explanation of the Problem


4 Some Examples of the Problem


5 Statements by Professional Bodies

The Institute of Chartered Accountants in England and Wales

The American Institute of Certified Public Accountants

The American Accounting Association

The Institute of Cost and Works Accountants

The Association of Certified and Corporate Accountants

The Institute of Chartered Accountants of Scotland


6 Types of Proposals that have been Advocated


7 Profit Determination - The Index Problem

The Matching Process and Profit Determination

The Two Main Schools of Thought Concerning Indexes

Why Are there Two Main Schools of Thought on Indexes?

The Going Concern Concept Is Involved

Some Arguments against Specific Indexes—and Some Rejoinders

Use a Consumer Price Index?

How Specific Should the Specific Indexes Be?

Some Variations from the Above Specific and General Index Schools

Indexes and "Objectivity"


8 Asset Valuations - "Holding Gains and Losses"

Asset Valuations

Holding Gains and Losses

Holding Losses Specifically

What if Inventories Are Valued at Net Selling Prices?

The "Good Buy"

The Private Speculator

Conclusion


9 Costs of Goods Sold and Inventories

(a) Wholesale and Retail Firms Using Perpetual Inventory Systems

(b) Manufacturing Firms Using Perpetual Inventory Systems

(c) Retail and Wholesale Firms Using Retail Inventory Methods

(d) Wholesale and Retail Firms Relying on Periodical Stock-takes

Terminology

LIFO

Appendix


10 Depreciation and Non-current Assets

Plant Registers

Depreciation Charges at Average Current Costs for the Period

Recommended Procedures

Accounting Entries for Recommended Procedures

Retrospective Adjustment to the Depreciation Provision Account

Accelerated Depreciation

Intangible Assets-Goodwill

Appendix


11 Monetary Items

"Holding Gains and Losses"

Long-term Liabilities

Preference Shareholders

When Are the Profits and Losses on Monetary Items Realized?

Which Index for Calculating Profits and Losses on Monetary Items?

The Computation of Profits and Losses on Monetary Items

Investments

Speculating in Commodities

Conclusion


12 Profit: At Average for Period Prices or a Tend of Period Prices?


13 An Illustrative Example - Including Changeover Procedures and Funds Statements

Results in Conventional Historical Costs

Change-over Procedures

Results in Average Current Costs

Protection of Capital

General Index Concept of Profit

Funds Statements

Appendix


14 Miscellaneous Matters

Comparisons with Previous Periods

Capital Reserve Accounts

The Position of Ordinary Shareholders

Company Taxation

Advantages of Accounting in Current Prices

The Auditor's Position


15 Actual aAplications of Accounting in Current Costs - Philips Electrical Industries

Philips Electrical Industries (N.V. Philips Gloeilampenfabrieken)

Costs of Goods Sold and Inventories

Depreciation and Non-current Assets

Monetary Items

General

Summary


16 Conclusion

Bibliography

Index