ABSTRACT
The effects of rising prices were being felt immediately following the Second World War, and McHaffie’s paper is an example of the discussion which took place in the UK at the end of the 1940s and beginning of the 1950s. It was concerned with a debate on the merits of introducing some form of replacement cost accounting. In particular, McHaffie described what he termed the economic concept of profit - that is, profit after preserving capital having allowed for the replacement of assets. The major problem was identified by him as the assumption in historic cost accounting of the stability of the money unit. Thus, he confused the issue of constant purchasing power (general price changes) with replacement cost (specific price changes). The paper discussed other related issues - the use of actual price changes or index movements; the need to cope with inventory and fixed asset price changes.
