Notes and References Chapter 2 I. L. Middleditch, 'Should Accounts Reflect the Changing Value of the Dollar?', Journal of Accountancy (February 1918) pp. 114-20. 2. Ibid. p. 120. 3. W. A. Paton, 'Depreciation, Appreciation and Productive Capacity', Journal of Accountancy (July 1920) p. 2. 4. H. W. Sweeney, Stabilized Accounting (New York: Harper, 1936). 5. See Supplementary Statement No. 2, 'Price Level Changes and Financial Statements', Accounting and Reporting Standards for Corporate Financial Statements and Preceeding Statements and Supplements (American Accounting Association, 1957) p. 26. 6. American· Institute of Certified Public Accountants (Account­ ing Research Division), 'Reporting the Financial Effects of Price Level Changes', Accounting Research Study No. 6 (New York, 1963) p. 1. 7. Ibid. 8. Accounting Principles Board, 'Financial Statements Restated for General Price Level Changes', Statement No. 3 (New York: American Institute of Certified Public Accountants, 1969). 9. Accountingfor Stewardship in a Period of Inflation (Research F ounda­ tion of the Institute of Chartered Accountants in England and Wales, 1968). 10. Accounting Standards Steering Committee, Inflation and Accounts- Discussion Paper and Fact Sheet (1971). 11. Accounting Standards Steering Committee, 'Accounting for Changes in the Purchasing Power of Money', Exposure Draft No. 8 (Institute of Chartered Accountants in England and Wales, 17 January 1973). 152 Accounting in an Inflationary Environment 12. Report of Inflation Accounting Committee under Chairman­ ship ofF. E. P. Sandilands, Inflation Accounting, Cmnd. 6225 (London: H.M.S.O., September 1975). 13. Accounting Standards Steering Committee, 'Accounting for Changes in the Purchasing Power of Money', Provisional Statement of Standard Accounting Pratice No. 7 (Institute of Chartered Accountants in England and Wales, 14 May 1974). 14. Accounting Standards Committee, 'Current Cost Account­ ing', Exposure Draft No. 18 (30 November 1976). 15. Financial Accounting Standards Board, 'Financial Reporting in Units of General Purchasing Power', Proposed Statement ofFinancial Accounting Standards (31 December 1974). Chapter 3 1. As will be explained below, individual transactions are not normally restated. The restatement process is generally applied on an average basis. 2. The term current purchasing power accounting used by the A.S.S.C. in the United Kingdom indicates that the purchasing power of money at the balance-sheet date is used. This chapter is titled 'constant purchasing power accounting' to provide more generality - the purchasing power at any date may be used. 3. Paragraph 28: items which are not monetary items are called non-monetary items, with the exception of issued share capital, which is neither a monetary nor a non-monetary item. 4. Accounting Principles Board, Statement No. 3. The abbreviation 'APB 3' is normally used. 5. Financial Accounting Standards Board, Proposed Statement of Financial Accounting Standards. 6. Australian Accounting Standards Committee, 'A Method of Accounting for Changes in the Purchasing Power of Money', Pre­ liminary Exposure Draft (December 1974). 7. In particular, paras 1-4. Chapter 4 1. See A. Hope, 'The Availability of Data for Inflation Account­ ing', Accountancy (October 1973) pp. 10-13. 2. Statement of Standard Accounting Practice No. 7, para. 16. Notes and References 153 3. Report of Inflation Accounting Committee, Inflation Accounting, para. 435, p. 130. 4. R. C. Jones, 'The Effect of Inflation on Capital and Profits, The Record of Nine Steel Companies', Journal of Accountancy (January 1949). 5. P. Rosenfield, 'Accounting for Inflation- A Field Test', Journal of Accountancy (June 1969) pp. 45-50. 6. J. Pearcy, 'Inflation and U.K. Published Accounts', Journal UEC (October 1970) pp. 196-203. 7. R. S. Cutler and C. A. Westwick, 'The Impact of Inflation Accounting on the Stock Exchange', Accountancy (March 1973) pp. 15-24. 8. This author is grateful to the Accountancy Staff of the Mono­ polies and Mergers Commission for permission to reproduce the figures contained in Table 4.8. 9. M. F. Morely, The Fiscal Implications of Inflation Accounting (Insti­ tute of Fiscal Studies/Chartered Accountants Trust for Education and Research, 1974). 10. Report of the Inflation Accounting Committee, Inflation Accounting, p. 136. Chapter 5 1. Report of the Inflation Accounting Committee, Inflation Accounting, chs 12-13. 2. A. C. Kelly, 'Can Corporate Income be Scientifically Ascer­ tained?', Accounting Review (July 1951) p. 293. 3. The distribution of a surplus to owners may take place period by period, e.g. dividends, or at the end of the business' operations, i.e. on liquidation. 4. E. 0. Edwards and P. W. Bell, The Theory and Measurement of Business Income (University of California Press, 1961) pp. 74-8. 5. This should not be confused with the valuation of ultimate forms at current selling prices. In that case the selling prices are those applicable at the present time, whereas for expected values the estimated future selling prices are used. 6. J. R. Hicks, Value and Capital (Oxford: Clarendon Press, 1946) p. 172. 7. That is, distributions of capital or dividends less any new capital introduced. 154 Accounting in an Iriflationary Environment 8. The symbols used to express the discounting process are ex­ plained in the appendix to Chapter 8. 9. Edwards and Bell, Theory and Measurement of Business Income. 10. K. MacNeal, Truth in Accounting (University of Pennsylvania Press/Oxford University Press, 1939). 11. R. J. Chambers, Accounting, Evaluation and Economic Behavior (Englewood Cliffs, N.J.: Prentice-Hall, 1966). 12. R. R. Sterling, Theory of the Measurement of Enterprise Income (University of Kansas Press, 1970). 13. Edwards and Bell, Theory and Measurement ofBusiness Income, p. 97. 14. ]. C. Bonbright, The Valuation of Property (New York: McGraw-Hill, 1937). 15. For instance, see D. Solomons, 'Economic and Accounting Concepts of Cost and Value', in Modern Accounting Theory, ed. M. Backer (Englewood Cliffs, N.J.: Prentice-Hall, 1966) pp. 117-40. 16. This particular approach was discussed by Solomons, ibid. and is reproduced in detail here because of its fundamental im­ portance. 17. If replacement is subject to constraints (and resources must be diverted from other profitable projects), the opportunity cost of replacement should be included in RC. 18. If the business is experiencing a shortage of finance and is unable to borrow sufficient funds to meet all its needs, the benefit derived from selling an asset may exceed the money amount of the proceeds received, as such proceeds will be available to finance profitable projects. Thus NRV should be defined as the present value of the best alternative use of the sales proceeds. This definition im­ plicitly includes the money amount of tlre sales proceeds as a lower limit of NRV. 19. For instance, see R. H. Parker and G. C. Harcourt, Readings in the Concept and Measurement of Income (Cambridge University Press, 1969) p. 19. 20. Report of Inflation Accounting Committee, Inflation Account­ ing, p. 176. 21. See T. A. Lee, Income Determination: Theory and Practice (Lon­ don: Nelson, 1974) ch. 6. 22. Edwards and Bell, Theory and Measurement of Business Income, ch. 3. 23. Figure 5.1 is adapted from Edwards and Bell, ibid. figures 6 and 7. Notes and References 155 24. For instance, Edwards and Bell, ibid.; and L. Revsine, Replacement Cost Accounting (Englewood Cliffs, N.J.: Prentice-Hall, 1973). 25. For a summary of this literature, see D. F. Drake and N. Dopuch, 'On the Case for Dichotomising Income', Journal of Account­ ing Research (Autumn 1965) p. 194. 26. For instance, see Revsine, Replacement Cost Accounting. 27. For a further discussion of these and other concepts of capital maintenance, see R. S. Gynther, 'Capital Maintenance, Price Changes and Profit Determination', Accounting Review (October 1970) pp. 712-30. 28. However, this does not imply that the valuation of assets at their value to the business is only appropriate with this concept of capital maintenance. As will be shown below that method of asset valuation may be used with other capital-maintenance concepts. 29. A similar table was devised by R. S. Gynther, 'Accounting for Changing Prices: Some Recent Thinking, Recommendations and Practice', Chartered Accountant in Australia (December 1971). 30. Y. ljiri, The Foundations of Accounting Measurement (Englewood Cliffs, N.J.: Prentice-Hall, 1967). 31. Financial Accounting Standards Board, 'Financial Reporting in Units of General Purchasing Power', Proposed Statement of Financial Accounting Standards. 32. Accounting Standards Steering Committee, Provisional State­ ment of Standard Accounting Practice No. 7. 33. Revsine, Replacement Cost Accounting, but it should be noted that, as Revsine abstracted from inflation in his analysis, it is not completely clear that he intended us to suppose he favours the money-value concept of capital maintenance. 34. Committee to Prepare a Statement of Basic Accounting Theory, A Statement of Basic Accounting Theory (New York: American Accounting Association, 1966). 35. Edwards and Bell, Theory and Measurement of Business Income. 36. R. L. Mathews, 'Income, Price Changes and the Valuation Controversy in Accounting', Accounting Review (1968) pp. 509-16. 37. R. S. Gynther, Accounting for Price-Level Changes: Theory and Practice (Oxford: Pergamon Press, 1966). 38. Chambers, Accounting, Evolution and Economic Behavior. 39. Sterling, Theory of the Measurement of Enterprise Income. 40.