Problem
Misleading accounting information due to inflation
Nature:
In an inflationary period, the basic accounting principle of recording all assets, liabilities and transactions at historical cost distorts the relationship between various items in the financial statements to a varying degree, depending upon the prevailing rates of inflation. In the case of transnational corporations, such distortions are often very significant because of differing rates of inflation in the host countries of foreign subsidiaries. Most companies retain historical cost data in their primary financial statements, but a few supplement the basic statements with statements showing date adjusted for changes in the general price level or giving information on the replacement cost of assets. There is no generally accepted practice with respect to accounting for the effects of inflation.
Broader Problems:
Imperfect accountingDeception in businessUnethical practices of accountantsSelf-interested manipulation of timing Subject(s):
Commerce → AccountingCommunication → Censorship
Economics → Economics
Information → Information
Related UN Sustainable Development Goals:
Problem Type:
E: Emanations of other problems Date of last update
12.08.2019 – 17:14 CEST