Security Analysts and the Price Level.

Abstract In recent years accounting literature has been replete with suggested modifications in accounting and financial reporting to overcome the effects of changing price levels. The tenor of most of such writings has been that "something must be done" to make accounting results more meaningful, more useful, and less misleading. There have been widely varying remedies suggested, from sweeping overhauls of fundamental approaches to adamant adherence to the status quo. This article makes an attempt to delineate the reasoning underlying the security analysts negative attitudes toward proposed price level adjustments to financial statements. When the price level was relatively stable, reported income was a meaningful mirror of overall increments in business resources. The price level dispute becomes the most vivid in the area of fixed asset accounting. It is self-evident that in capital goods industries depreciation is almost always a significant amount. But even where depredation is a small fraction of total expenses, it may be an important figure in comparison to net income.