Impact of Price-Level Accounting.

Abstract Price changes have long been recognized in both accounting and economic literature as being a serious problem. One widely advocated solution has been general price-level accounting. This article reports the results of applying general price-level accounting techniques, as set forth in the FASB's December 1974 exposure draft, for each of 1,050 U.S. companies for each of 3 recent years. Summary income statements and balance sheets were developed for each company by using (1) data from the Compustat annual industrial files; (2) changes in the general price level as measured by the GNP Deflator Index; and (3) self-constructed computer programs intended to produce approximations of amounts which would have been reported had the firms been applying the FASB-proposed restatement techniques. Summaries of the approximated price level data and ratios based thereon form the empirical finding of the study which provides an overview of what the impact would have been for more than a thousand companies had the FASB's proposal already been in effect. In summary, that impact varied greatly among individual firms and industry groups.