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Inflation Accounting
Inflation accounting comprises a range of accounting models designed to correct problems arising from historical cost accounting in the presence of high inflation and hyperinflation. For example, in countries experiencing hyperinflation the International Accounting Standards Board requires corporations to implement financial capital maintenance in units of constant purchasing power in terms of the monthly published Consumer Price Index. This does not result in capital maintenance in units of constant purchasing power since that can only be achieved in terms of a daily index. Historical cost basis in financial statements Fair value accounting (also called replacement cost accounting or current cost accounting) was widely used in the 19th and early 20th centuries, but historical cost accounting became more widespread after values overstated during the 1920s were reversed during the Great Depression of the 1930s. Most principles of historical cost accounting were developed after th ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Historical Cost
The historical cost of an asset at the time it is acquired or created is the value of the costs incurred in acquiring or creating the asset, comprising the consideration paid to acquire or create the asset plus transaction costs. Historical cost accounting involves reporting assets and liabilities at their historical costs, which are not updated for changes in the items' values. Consequently, the amounts reported for these balance sheet items often differ from their current economic or market values. While use of historical cost measurement is criticised for its lack of timely reporting of value changes, it remains in use in most accounting systems during periods of low and high inflation and deflation. During hyperinflation, International Financial Reporting Standards (IFRS) require financial capital maintenance in units of constant purchasing power in terms of the monthly CPI as set out in IAS 29, Financial Reporting in Hyperinflationary Economies. Various adjustments to hi ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Constant Purchasing Power Accounting
Constant purchasing power accounting (CPPA) is an accounting model that is an alternative to model historical cost accounting under high inflation and hyper-inflationary environments. It has been approved for use by the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB). Under this IFRS and US GAAP authorized system, financial capital maintenance is always measured in units of constant purchasing power (CPP) in terms of a Daily CPI (consumer price index) during low inflation, high inflation, hyperinflation and deflation; i.e., during all possible economic environments. During all economic environments it can also be measured in a monetized daily indexed unit of account (e.g. the Unidad de Fomento in Chile) or in terms of a daily relatively stable foreign currency parallel rate, particularly during hyperinflation when a government refuses to publish CPI data. Authorized by the IASB during low inflation In the IASB's original Fram ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Real Versus Nominal Value (economics)
In economics, nominal value refers to value measured in terms of absolute money amounts, whereas real value is considered and measured against the actual goods or services for which it can be exchanged at a given time. Real value takes into account inflation and the value of an asset in relation to its purchasing power. In macroeconomics, the real gross domestic product compensates for inflation so economists can exclude inflation from growth figures, and see how much an economy actually grows. Nominal GDP would include inflation, and thus be higher. Commodity bundles, price indices and inflation A commodity bundle is a sample of goods, which is used to represent the sum total of goods across the economy to which the goods belong, for the purpose of comparison across different times (or locations). At a single point of time, a commodity bundle consists of a list of goods, and each good in the list has a market price and a quantity. The market value of the good is the marke ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Philosophy Of Accounting
The philosophy of accounting is the conceptual framework for the professional preparation and auditing of financial statements and accounts. The issues which arise include the difficulty of establishing a ''true and fair'' value of an enterprise and its assets; the moral basis of disclosure and discretion; the standards and laws required to satisfy the political needs of investors, employees and other stakeholders. The discipline of accounting insists that transparency is achievable. Fairness has an important role in the practice of accounting. Accordingly, it seems appropriate that philosophy as a relevant way of understanding truth and fairness in accounting is well considered. Some authors have already underlined the key role played by philosophy in accounting with principles such as substance over form, ethics, and accountability, therefore more abstract concepts like fairness, justice, equity, and truth have a due place in accounting. Introduction Often, accountants are ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Inflation Hedge
An inflation hedge is an investment intended to protect the investor against— hedge—a decrease in the purchasing power of money—inflation. There is no investment known to be a successful hedge in all inflationary environments, just as there is no asset class guaranteed to increase in value in non-inflationary times. Conventional strategies for protecting wealth from inflation normally involve diversification into traditional assets like common stocks, gold, fixed-income securities, and real estate, but new strategies have value-generating assets like solar photovoltaics. Overview Inflation can impact investment decisions by making it difficult to predict future prices. This makes it risky to invest in certain assets, such as commodities, that may be impacted by inflation. Inflation can erode the value of investments over time. This is why it is important for investors to consider inflation when making investment decisions. ''Barron's Finance & Investment Handbook'' state ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Constant Purchasing Power Accounting
Constant purchasing power accounting (CPPA) is an accounting model that is an alternative to model historical cost accounting under high inflation and hyper-inflationary environments. It has been approved for use by the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB). Under this IFRS and US GAAP authorized system, financial capital maintenance is always measured in units of constant purchasing power (CPP) in terms of a Daily CPI (consumer price index) during low inflation, high inflation, hyperinflation and deflation; i.e., during all possible economic environments. During all economic environments it can also be measured in a monetized daily indexed unit of account (e.g. the Unidad de Fomento in Chile) or in terms of a daily relatively stable foreign currency parallel rate, particularly during hyperinflation when a government refuses to publish CPI data. Authorized by the IASB during low inflation In the IASB's original Fram ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Exchange Rate
In finance, an exchange rate is the rate at which one currency will be exchanged for another currency. Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of the euro. The exchange rate is also regarded as the value of one country's currency in relation to another currency. For example, an Interbank lending market, interbank exchange rate of 141 Japanese yen to the United States dollar means that ¥141 will be exchanged for or that will be exchanged for ¥141. In this case it is said that the price of a dollar in relation to yen is ¥141, or equivalently that the price of a yen in relation to dollars is $1/141. Each country determines the exchange rate regime that will apply to its currency. For example, a currency may be floating exchange rate, floating, fixed exchange rate, pegged (fixed), or a hybrid. Governments can impose certain limits and controls on exchange rates. Countries can als ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Replacement Cost
The term replacement cost or replacement value refers to the amount that an entity would have to pay to replace an asset at the present time, according to its current worth. In the insurance industry, "replacement cost" or "replacement cost value" is one of several methods of determining the value of an insured item. Replacement cost is the actual cost to replace an item or structure at its pre-loss condition. This may not be the "market value" of the item, and is typically distinguished from the "actual cash value" payment which includes a deduction for depreciation. For insurance policies for property insurance, a contractual stipulation that the lost asset must be actually repaired or replaced before the replacement cost can be paid is common. This prevents overinsurance, which contributes to arson and insurance fraud.Thomas JE, Wilson B. (2005). The Indemnity Principle: Evolution from a Financial to a Functional Paradigm]. ''Journal of Risk Management & Insurance''Free full-t ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Securities And Exchange Commission
The United States Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street crash of 1929. Its primary purpose is to enforce laws against market manipulation. Created by Section 4 of the Securities Exchange Act of 1934 (now codified as and commonly referred to as the Exchange Act or the 1934 Act), the SEC enforces the Securities Act of 1933, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940, and the Sarbanes–Oxley Act of 2002, among other statutes. Overview The SEC has a three-part mission: to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. To achieve its mandate, the SEC enforces the statutory requirement that public companies and other regulated entities submit quarterly and annual reports, as well as other periodic disclosures. In addition to annual financial re ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Consumer Price Index
A consumer price index (CPI) is a statistical estimate of the level of prices of goods and services bought for consumption purposes by households. It is calculated as the weighted average price of a market basket of Goods, consumer goods and Service (economics), services. Changes in CPI track changes in prices over time. The items in the basket are updated periodically to reflect changes in consumer spending habits. The prices of the goods and services in the basket are collected (often monthly) from a sample of retail and service establishments. The prices are then adjusted for changes in quality or features. Changes in the CPI can be used to track inflation over time and to compare inflation rates between different countries. While the CPI is not a perfect measure of inflation or the cost of living, it is a useful tool for tracking these economic indicators. It is one of several Price index, price indices calculated by many national statistical agencies. Overview A CPI is ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Financial Accounting Standards Board
The Financial Accounting Standards Board (FASB) is a private standard-setting body whose primary purpose is to establish and improve Generally Accepted Accounting Principles (GAAP) within the United States in the public's interest. The Securities and Exchange Commission (SEC) designated the FASB as the organization responsible for setting accounting standards for public companies in the U.S. The FASB replaced the American Institute of Certified Public Accountants' (AICPA) Accounting Principles Board (APB) on July 1, 1973. The FASB is run by the nonprofit Financial Accounting Foundation. FASB accounting standards are accepted as authoritative by many organizations, including state Boards of Accountancy and the American Institute of CPAs (AICPA). Structure The FASB is based in Norwalk, Connecticut, and is led by seven full-time Board members,Spiceland, David; Sepe, James; Nelson, Mark; & Tomassini, Lawrence (2009). ''Intermediate Accounting'' (5th Edition). McGraw-Hill/ ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Gross National Product
The gross national income (GNI), previously known as gross national product (GNP), is the total amount of factor incomes earned by the residents of a country. It is equal to gross domestic product (GDP), plus factor incomes received from non-resident by residents, minus factor income paid by residents to non-resident. In contrast to GDP, GNI is not a concept of value added, but a concept of income. GNI is the basis of calculation of the largest part of contributions to the Budget of the European Union. In February 2017, Ireland's GDP became so distorted from the base erosion and profit shifting ("BEPS") tax planning tools of U.S. multinationals, that the Central Bank of Ireland replaced Irish GDP with a new metric, Irish Modified GNI (or "GNI*"). In 2017, Irish GDP was 162% of Irish Modified GNI. GNI contrast with net national income : NNI = GNI - Depreciation The Atlas method can be applied to correct for fluctuating exchange rates. History and name change The ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
