Price Level Adjustments to Financial Statements: A Rejoinder.

Abstract The article presents a critical appreciation by the author in response to a Abraham J. Briloff's criticism of his article "A technique to Adjust Financial Statement Data for Changing Price Levels," published in the October 1961 issue of the Journal "The Accounting Review." The author retorts that Briloff has, for the second time, attacked the idea of indicating the effect of inflation on business income, the earlier account was in July 1958 issue of the journal. The author states that as far as net income is concerned, Briloff embraces the unusual concept that all increase, realized or unrealized, in the monetary value of a firm's net assets over a period of time is income, and as such is taxable. To him, it matters not whether the increase in dollar value is the result of realization or conversion, or partly the result of a monetary unit that has declined in value. At the present time, U. S. businesses are taxed on realized gains which partly reflect inflated dollars. The author comments that to this current inequity, Briloff would add a tax on unrealized gains as well. The author informs that in this article, he will consider only the weaknesses of Briloff's recommendations and his adamant position against price level adjustments to financial statements.