The Basis of Future Financial Statements Will Be in Units of General Purchasing Power or Current Replacement Cost

Date of Graduation

Spring 1976


Master of Business Administration


Management and Information Technology

Committee Chair

Glenn Downing


The hypotheses have been formulated as follows: Disclosing the replacement cost of certain accounts is a necessary feature for removing the deficiency of traditional financial statements. Disclosing a general price level adjustment for all accounts is a necessary feature for removing the deficiency of traditional financial statements. Various disclosure methods which present price level changes have been advocated to supplement the current statements, current value, economic resource, general purchasing power, replacement cost, and others. Two of these methods, general purchasing power and replacement cost, have become the recommended methods by the Financial Accounting Standards Board and the Securities and Exchange Commission, respectively. A contrast between these two methods is made to reveal their favorable and unfavorable characteristics. The conclusions drawn from this research are that a majority of the respondents indicate readers of financial statements are dissatisfied with the current method of presenting financial information. A larger percentage favor an adjustment to traditional statements with a general price level index, instead of restatements to current replacement cost. When the inventory, the book value of fixed assets, cost of goods sold, and depreciation accounts are considered individually, restatements to current replacement cost had more agreement than general price level adjustments. Respondents indicate, however, that replacement cost information would be more confusing than general price level adjustments.

Subject Categories

Business Administration, Management, and Operations


© David L. Bearden