Abstract This paper is intended to identify and explain the operation of factors that determine the direction and magnitude of the difference between earnings computed on the conventional basis and earnings computed under general price-level accounting. A number of studies have been made for the purpose of estimating effects of Common unit accounting (CUA) on popular financial parameters, especially those involving income. Some key results of specific studies were that economist Russell J. Petersen reported slightly larger net income numbers, on the average, on the CUA basis-compared with variable unit accounting (VUA) income numbers and suggested that to the extent that this displacement effect is stable over time and across industries, investors might very well be able to adjust for general price level movements when using published financial information for decision making. The British mechanical engineering industry study showed that aggregate CUA profits for the industry ranged from 62 percent to 78 percent of VUA profits for the 6 different years studied and that earnings exceeded dividends by 124 million pounds on VUA and by only 10 million pounds under CUA over the 6 year period.
George J. Staubus (Thu,) studied this question.
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