The Effects of Restating Financial Statements for Price-Level Changes: A Comment.

Abstract The article comments on various studies related to the effects of restating financial statements for price-level changes. The three behavioral studies referenced all presented "decision makers" with different sets of data and attempted to infer the effect of these presentations on investment-related decision behavior. The author's study finds that different information sets produced different decisions as to investment preferences. To evaluate the importance of these differences one must evaluate the behavioral research. First, the author lists the differences among the three studies of decision behavior at the individual level that are important in evaluating the conclusions reached. The discussion then turns to a detailed examination of the experimental designs used, together with their inherent limitations. The discussion of design concentrates on the subject-selection process and the subject's task assignment. There are those who would argue that the question of whether or not to restate financial reports for price-level changes is only a question of logic or theory. An accountant's assumption of a stable measuring unit, the dollar, is clearly not met, and, subject to obtaining the best measure of this change, logic dictates that the measure should be corrected.