INFLATION ACCOUNTING

Special accounting techniques that can be used in inflationary times. It adjusts financial statements based on price indexes to show a company’s real financial position during high inflation periods. This technique aims to denote how increasing prices and low purchasing power of the currency influence a company’s cost of refinancing its productive assets, as well as its capacity to keep a sufficient profit level on the capital employed. Firms that operate in countries experiencing hyperinflation, may be mandated to update their statements regularly, to make them relevant to present economic and financial situations.

POPULAR TERMS

POPULAR ARTICLE