Price Level Adjustments: Rejoinder to Professor Husband.

Abstract Accounting Association is bound to be considered as having the weight of authority of the American Accounting Association behind it. The traditional balance sheet and income statement, employing historical dollar costs, have proved their usefulness and are of primary importance for many purposes. Reports prepared to reflect fluctuations in the value of the dollar may prove to have substantial usefulness for other purposes. The conceptual soundness of any special purpose report can be judged only by knowing fairly precisely what those special purposes are behind the recommendation for adjusted financial statements seems to lie the argument of Henry Sweeney that to add and subtract dollars in financial statements which have different purchasing powers commits a mathematical blunder particularly significant in periods when price levels have changed substantially. Upon close examination it appears that the claims typically made, that accountants do something about the effects of inflation, actually demonstrate that changing price levels breed a whole new and virulent set of stresses and strains in the economy. The urgent exhortation to do something would more appropriately be directed towards economic statesmen rather than accountants. Presumably the stresses and strains imposed by changing price levels would be with us even in a world completely acclimated to financial statements adjusted for those price level changes.