This document discusses inflation accounting standards in the UK and USA. It outlines the history and objectives of standards like FAS 33 in the USA and SSAP 16 in the UK. Key differences are noted, such as FAS 33 using a general price index model while SSAP 16 uses a current cost accounting model. Disclosure requirements under each standard are also summarized. The document further discusses approaches taken in other countries like India, China, and at the international level through standards like IAS 21. In conclusion, it notes that many inflationary countries do not have specific standards due to convergence with IFRS, limitations of inflation accounting, and a "wait and see" approach.

1. 2014
1
VINCENT KONADU TAWIAH
INFLATION ACCOUNTING
STANDARDS IN UK AND
USA

2. INTRODUCTION
 Inflation accounting came about due to the
limitation of historical cost accounting
 USA and UK are main countries advocating
inflation accounting
 Most countries don’t have specific standards for
it.

3. HISTORY OF INFLATION ACCOUNTING
 Early 19th century
 Fisher’s 1911 The Purchasing power of money
 Henry W. Sweeney 1936, Stabilized
Accounting
 AICPA research in 1969

4. USA – FAS 33
 Financial Reporting and Changing Prices
 First official full standard in USA
 Issued in 1979 by the Financial Accounting
Standard Board
 Before there was ASR 190 issued by SEC in 1974

5. OBJECTIVES OF FAS 33
 Assessment of future cash flows
 Assessment of enterprise performance
 Assessment of erosion of operating capability
 Assessment of erosion of general purchasing
power

6. DISCLOSURES
 Income from continuing operations adjusted
for effects of general price inflation
 gain or loss on monetary items
 Holding gain on non-monetary items
 Current cost of assets
 A five year summary of current cost data

7. FAS 82 & FAS 89
 FAS 82 Financial Reporting and Changing
Prices- Elimination of certain disclosures
(CDA) was issued in 1984 by FASB
 FAS 89- Financial Reporting and Changing
Prices was introduce in 1986; current cost
income measurement purchasing power gain
or loss holding gain not required

8. UK- SSAP 16
 Current Cost Accounting
 Proposed by Hyde Committee as ED 24 in 1977.
 First attempt was SSAP 7 in1974
 FEP Sandilands Committee Report in 1975
 Steering Group ED 18

9. OBJECTIVES OF SSAP 16
 The financial viability of the business
 Return on investment
 Pricing policy, cost control, and distribution
decisions
 Gearing

10. DISCLOSURES
 Current Cost profit and loss and balance sheet
 DA, COSA, MWCA, GA
 PPE should be shown at the value to the
business

11. FAS 33 vs. SSAP 16
PARAMETER SSAP16 FAS33
General requirement Complete P& L, Balance
sheet on current values
supplementary disclosures
on current values
Objective Current Value model (CCA) General Price Index (GPPA)
Operating Profit CC operating profit
CC profit to shareholders
CC from continuing
Operations
PP gain on net Monetary
item
Increase & decrease in PPE
inventory
GA & PP gain or loss Nominal increase in MWC,
DA and Inventory
Change in general PP of
Monetary Items
Holding gain and losses realized and unrealized gains Real holding gains
Capital maintenance Physical capital Financial capital

12. INDIA
 Guidance Note on Accounting for Changing
Prices in 1982 by ICAI
 Encourage the adoption of inflation
accounting
 Periodic revaluation of fixed assets & LIFO
 Current Purchasing Power Accounting (CPPA)
 Current Cost Accounting (SSAP 16)

13. DISCLOSURES IN INDIA
 India companies follow SSAP 16 in accordance
with Guidance notes by ICAI
 Current cost P/L account
 Current cost Bal sheet
 Other inflation accounting information
 Eg. Oil India and INFOSYS

14. CHINA
 No specific standard for inflation accounting
 ASBE 19 Foreign Currency Translation prescribes the
translation requirements of financial statements of a
foreign operation which is operating in a
hyperinflationary economy
 Restate the balance sheet & P/L by adopting the
general price index

15. IASC & IAS 21
 IAS 6 Accounting Responses to Changing
Prices was issued in 1977 (Description)
 IAS 15 15 Information Reflecting the Effects of
Changing Prices in 1981 (CPP & CCA)
 IAS 29 Financial Reporting in
Hyperinflationary Economies

16. CONCLUSION
 No standards in inflation countries because;
 Convergence towards IFRS
 High fluctuations in prices
 Various limitations with the inflation
accounting
 “Wait and see theory”