Impact of Inflation Accounting on Corporate Profits - A Study of 57 Indian Companies

Gupta Ramesh and Bhandari L C

IIMA Working Papers from Indian Institute of Management Ahmedabad, Research and Publication Department

Abstract: The accounting profession all over the world is currently considering whether accountants should be required to adjust reported income for inflation. The limited objective of this article is to measure the impact of price-level accounting on reported profits and relevant financial ratios. The earnings of 57 companies covering 9 industries have been restated for a period of 7 years (1970-1976). The study shows that the impact of inflation on individual companies and industry groups varies greatly. The results with varying inflation rates emphasize the differential effects on companies of general price level adjustments and the significance of monetary gains and losses. The effects of restatement on dividend coverage and tax burden have been suitably highlighted.

Date: 1978-08-01
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Persistent link: https://EconPapers.repec.org/RePEc:iim:iimawp:wp00311

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