Published by:
Harvard Business Publishing
Length: 16 pages
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Abstract
For some time now, accountants, economists, and executives have been engaged in debate: Given the inflationary economy we are in, do balance sheets, income statements, and other financial statements based on historical-cost accounting give a valid picture of a company''s operations and financial position? If not, what form of replacement-cost, or price- level-adjusted, accounting should be used instead? The United States'' continued high rate of inflation has convinced many people that statements based on historical-dollar conventions are no longer realistic indicators of financial position or operating results. Mr Anthony is not one of those people, and in this article he makes the case for keeping the traditional historical-cost method.
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Abstract
For some time now, accountants, economists, and executives have been engaged in debate: Given the inflationary economy we are in, do balance sheets, income statements, and other financial statements based on historical-cost accounting give a valid picture of a company''s operations and financial position? If not, what form of replacement-cost, or price- level-adjusted, accounting should be used instead? The United States'' continued high rate of inflation has convinced many people that statements based on historical-dollar conventions are no longer realistic indicators of financial position or operating results. Mr Anthony is not one of those people, and in this article he makes the case for keeping the traditional historical-cost method.