ABSTRACT
Seldom has an accounting subject been so fiercely debated over so long a period as the one at issue—the effect of price level changes on the determination, reporting and interpretation of income and of financial condition. With inflationary forces still at work—uncontrolled money supply, large government debt, deficit spending to avoid ‘recessions’, union demands for wage increases in excess of the gain in productivity, support of farm prices, the mobilisation programme, etc., together with accounting methods that fail to reflect adequately the impact of inflation on profits. ‘Generally speaking, any index number adjustment for change in the value of the monetary unit must be viewed, not as a fact, but as an indication of fact— although quite possibly a more accurate indication than is often possible in other accounting judgments. Since the basic accounting records and (at least for the present) the primary financial statements are on the basis of historical dollar cost.
