Accounting for Inflation: The Dog That Didn't Bark

Ray Ball ()

Abacus, 2024, vol. 60, issue 1, 1-12

Abstract: A fundamental flaw in the methods that academics and practitioner bodies have proposed to account for price changes is that they assume the real and monetary sectors are independent. This is the logic of classical macroeconomics pre‐Keynes/Friedman, which long since has been discredited by theory and evidence. Both economy‐wide and idiosyncratic shocks to firms’ factor prices are unlikely to be positively correlated with their financial strengths, as assumed by the price adjustment methods that have been proposed. This helps explain the historical reluctance of governments and regulatory bodies to embrace proposed accounting standards that require firms to adjust their financial statements for either general or firm‐specific price changes. For example, firms then would tend to report stronger balance sheets at a time of weakened financial positions.

Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/abac.12308

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:abacus:v:60:y:2024:i:1:p:1-12

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0001-3072

Access Statistics for this article

Abacus is currently edited by G.W. Dean and S. Jones

More articles in Abacus from Accounting Foundation, University of Sydney
Bibliographic data for series maintained by Wiley Content Delivery ().