ABSTRACT
Table 5.1 is an indication of the rapid price inflation suffered by the United Kingdom during the 1970s and early 1980s. Table 5.2 indicates that the United Kingdom was not alone. When price changes continue at significant rates over significant periods of time, they pose problems for traditional historical accounts which rely on money as the unit of account and on historical acquisition cost as the basis of valuation. At low levels of inflation, ‘inflation accounting’ tends to remain a subject of academic interest. At higher levels, it becomes a matter of serious professional and public concern. Annual percentage change in consumer prices in the United Kingdom: 1960–2004 https://www.niso.org/standards/z39-96/ns/oasis-exchange/table">
Year Decade
0
1
2
3
4
5
6
7
8
9
Average for decade
%
%
%
%
%
%
%
%
%
%
%
1960s
1.0
3.6
4.1
2.1
3.2
4.8
3.9
2.4
4.7
5.5
3.5
1970s
6.4
9.4
7.1
9.2
15.9
24.2
16.5
15.9
8.2
13.5
12.5
1980s
18.0
11.9
8.6
4.6
5.0
6.1
3.4
4.1
4.9
7.8
7.4
1990s
9.5
5.9
3.7
1.6
2.5
3.4
2.4
3.1
3.4
1.6
3.7
2000–04
2.9
1.8
1.6
2.9
3.0
2.5
Source: International Financial Statistics website, Washington, DC: International Monetary Fund. Average annual percentage change in consumer prices in the Group of Seven: 1960 to 2004 https://www.niso.org/standards/z39-96/ns/oasis-exchange/table">1960s
1970s
1980s
1990s
2000–04
%
%
%
%
%
United Kingdom
3.5
12.5
7.4
3.7
2.5
Canada
2.5
7.3
6.5
2.2
2.4
France
3.9
8.9
7.3
1.9
1.9
Germany
2.4
4.9
2.9
2.3
1.5
Italy
3.4
12.2
11.0
4.1
2.5
Japan
5.4
9.0
2.5
1.2
−0.5
United States
2.3
7.1
5.5
3.0
2.5
Source: International Financial Statistics website, Washington, DC: International Monetary Fund.Accounting grew up as a day-by-day record of business dealings. Its figures are a series of snapshots, each a glimpse of some event as it happened. They are faithful history. But usually they are left as historical records; the accountant does not touch them up when conditions change at later times. For instance, he continues to measure assets and inputs at their original cost, no matter how far their current values have moved. Particularly during inflation, the values are apt to move a long way. So now the question is whether the accountant should not try to update his figures.
(Baxter, 1975: v)