Analysis and Some of The Obstacles to Inflation Accounting

William W. Kapala


The purpose of this study is to peer into the issues and problems of inflationary accounting and provide insight into the obstacles which are generated as a result of any plan to phase an inflationary accounting system into the present historical accounting system.

Chapter I presents a need for a system which can adequately account for fluctuating prices by concentrating primarily on the inadequacies of the historical cost accounting system.

Chapter II provides an interesting discussion of the current cost and value accounting systems in relation to the inflationary accounting options available for use within the two systems.

Chapter III presents several of the key issues involved with any transistion to an inflationary accounting system. Historical cost importance, income and tax reporting, and subjective values are the major issues which are discussed.

Chapter IV differentiates the current cost and value forms of accounting by evaluating the relative advantages and disadvantages of both.

Chapter V attempts to find a common link between the available accounting options and presents a logical argument in support of their simultaneous use in the present system. Current cost is selected over current value for a number of reasons.

Finally, Chapter VI lists several obstacles against an easy transition to the current cost system. The magnitude of these obstacles, however, seems to be well within man's abilities to conquer with time.