International Accounting

1

• International Accounting
• and Financial Reporting
• Winter 2008
• William F. OBrien, MBA, CPA

2
Session XII

• Changing Prices

3
Impact of Inflation

• Avoid assets hold liabilities
• Old costs matched with new revenues leads to
  sense of false income while value of cash dwindles

4
General and Specific Price Increases

• General price level increases (GPI)
• Based on market basket of goods services
• Specific price level increases (SPI)
• Relates to a particular item

5
Constant Money Restatement(Current Purchase
Power Accounting)

• Balance sheet
• I/D items as monetary or nonmonetary
• Extend monetary items at their face amount
• Adjust nonmonetary items for changes in
  purchasing power
• Roll-forward prior year balances
• Income statement
• Adjust items based date of occurrence
• Compute depreciation based on adjusted historical
  cost
• Adjust other items based upon weighted average
• Compute cost of goods sold based on adj.
  Inventory items
• Calculate purchasing power gain or loss

6
IASB and Inflation

• IAS 29 Hyperinflation report
• Requirement for IAS countries
• Hyperinflation exists when 3-year cumulative
  inflation exceeds 100 percent
• Restatement for GPI changes in primary financial
  statements
• Hotly debated issue without firm resolution
• Note the number of countries that have added PLA
  standards and then withdraw them (US, UK, Asia
  etc.)