Accounting for Changing Prices: Some Midcourse Corrections
Article Abstract:
Standards for inflation accounting have caused controversy and have received no across-the-board support from the Financial Accounting Standards Board's (FASB's) diverse constituents. Price changes, particularly in certain businesses, have rendered historical cost data useless. The historical background of standard setting by the FASB in this area illustrates its position of being stuck between the Securities and Exchange Commission (SEC) and management. Statement No. 33's development illustrates the technical, theoretical and political factors affecting standard-setting. The measurement of the current cost of specialized assets poses complex problems. The FASB research program has summarized research conducted concerning accounting for changing prices. A data base of changing prices has been developed by the FASB. The most critical issue is whether or not to continue some form of disclosures. Some form of disclosure, whether experimental or permanent, is still favored, but a dual set of disclosures is confusing and not favored. Disclosures which account for changing prices are favored in industries with significant inventories, properties, plant and equipment levels. Some modifications to Statement No. 33 are suggested including reducing flexibility of selecting price indexes and requiring more management discussions of the disclosures. Two format modifications are discussed. Extending the experimental stage before permanent adoption of standards is recommended to allow for more research.
Publication Name: Journal of Accountancy
Subject: Law
ISSN: 0021-8448
Year: 1984
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A Special Area of Service: Risk Management
Article Abstract:
Risk management used to fall under the domain of the insurance department. Escalating costs and new forms of insurance have spread risk awareness throughout companies. Certified public accountants (CPAs) can bring a needed objective view to the situation. Information can provide great cost savings and CPAs can help develop financial and accounting information systems. Risk management is an area of potential service that CPAs should be aware of since their experience with other firms and ongoing client relationships make this an almost natural expansion of services.
Publication Name: Journal of Accountancy
Subject: Law
ISSN: 0021-8448
Year: 1984
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Prospective Financial Statements: Guidelines for a Growing Practice Area
Article Abstract:
An exposure draft containing guidelines for prospective financial statements has been proposed. The draft does not apply to pro forma or partial presentations. It classifies statements into forecasts, projections or multiple projections. A forecast would be the best estimate of management and projections would answer hypothetical assumptions. The draft proposes that accountants report whenever they are associated with the statements. Accounts should disassociate themselves from statement omitting the summary of significant assumptions. Examples are included.
Publication Name: Journal of Accountancy
Subject: Law
ISSN: 0021-8448
Year: 1984
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